UPDATE 1-Speedo extends sponsor deal with Michael Phelps

By Ben Klayman

CHICAGO, Sept 9 (Reuters) - More than seven months after a photo was published showing Olympian Michael Phelps inhaling from a pipe used for smoking marijuana, swimwear company Speedo said it had extended its sponsorship deal with the gold medal-winning swimmer.

Terms of the four-year deal that runs through 2013 were not disclosed on Wednesday, but Speedo officials called it the brand's largest sponsorship deal in its 80-year history. Last summer, Phelps was reported to be earning about $5 million a year from his combined endorsements.

"We have a shared vision to grow the sport of swimming," Speedo's senior vice president of marketing, Craig Brommers, said in a telephone interview.

"In the worst economy of our generation, the Speedo performance category is actually stronger than ever and that's attributed to the Michael Phelps factor," Brommers added, pointing to USA Swimming data that shows an 11 percent increase in swimming participation over the last year.

Some analysts had questioned whether Phelps' marketability would suffer after Britain's News of the World newspaper in February ran a picture of Phelps with a glass pipe, saying it was taken at a student party at the University of South Carolina last November.

The newspaper did not say Phelps was smoking marijuana, but added the glass pipe he was holding in the photo was generally used to smoke the drug. Phelps apologized, calling his behavior "regrettable" and "inappropriate," and was suspended for three months by USA Swimming. Competing again during the summer, he won the most medals at the world aquatics championships in Rome.

At the time, analysts noted it was not Phelps' first transgression. In 2004, a few months after winning six gold and two silver medals at the Athens Olympic Games, Phelps, then 19, pleaded guilty to a drunk-driving charge and apologized.

Soon after the February photo appeared, food company Kellogg Co (K.N) allowed its sponsorship deal with Phelps to expire, but other corporate backers have stood by him. Analysts say the star athlete offers a strong platform for communicating a corporate brand name and message to the public.

With 14 Olympic gold medals, Phelps, 24, has won more than anyone else after his eight at the Beijing Olympics last summer. Speedo, which has sponsored Phelps since 2001, awarded him a $1 million bonus for breaking Mark Spitz's record of seven gold medals at the Munich Games in 1972.

"Michael has transformed the sport of swimming, with more fan interest and participation than ever before," Joe Gromek, CEO of Warnaco Group Inc (WRC.N), North American licensee for the Speedo brand, said in a statement.

Warnaco distributes almost half of Speedo gear globally. Speedo's annual global retail sales total about $1.1 billion. Phelps has previously said that he will retire after the 2012 Summer Olympics in London.

Phelps' other sponsors include high-end watch maker Omega, video-game publisher 505 Games, Hilton Hotels Corp (HLNQ.PK), PureSport, Subway, Visa Inc (V.N), automaker Mazda Motor Corp (7261.T) in China and H2O Audio. (Reporting by Ben Klayman, editing by Maureen Bavdek)