Quiksilver shares up on Cleveland Golf sale

LOS ANGELES, Oct 31 (Reuters) - Shares of surf-inspired clothing maker Quiksilver Inc (ZQK.N: Quote, Profile, Research, Stock Buzz) rose nearly 5 percent on Wednesday on news of the upcoming sale of its Cleveland Golf unit, which analysts had complained was a distraction and drag on profit.

The company on Tuesday announced the sale for $132.5 million to Japanese company SRI Sports Ltd (7825.T: Quote, Profile, Research, Stock Buzz). It expects the transaction to close in the quarter ending on Jan. 31 and plans to use the proceeds to pay down debt.

"We believe the sale of Cleveland is the first in a series of positive moves that will expand earnings, reduce debt and eliminate an overhang," Lazard Capital analyst Todd Slater wrote in a note on Wednesday, adding that the equipment business had reduced Quiksilver earnings by 23 cents per share in 2007.

Quiksilver acquired a portion of Cleveland Golf as part of its purchase of French ski maker Rossignol in 2005 and bought the rest this past September.

The Huntington Beach, California-based company plans to evaluate how to reduce its exposure to risk in other equipment businesses, such as Lange, Look and Dynastar, that were part of the Rossignol acquisition.

Quiksilver, which is best known for its surf- and skate-inspired clothing and footwear lines, has said it hopes to turn Rossignol into a major winter apparel brand.

But analysts have argued that Rossignol's portfolio of brands selling skis and boots, snowboards and bindings are not a good fit with Quiksilver and sharply drag down profit, especially as those businesses are weather-dependent.

Quiksilver Chief Executive Robert McKnight said in a statement that Cleveland Gold was "not a strategic asset for us as we strive to maximize our core businesses and brands."