CNBC.com

In one of the most unprecedented moves in sports business history, Nike  has agreed to allow its Olympic swimmers to wear the Speedo LZR Racer suit for Olympic competition.

Sources told CNBC that Nike

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[NKE  Loading...      ()   ]swimmers received a letter telling them that wearing the Speedo brand during the games would not be seen as a compromise to their contract with the world's biggest shoe and apparel company.

When reached, Nike spokesman Dean Stoyer acknowledged the letter and the decision.

"After conferring with Nike swimmers following recent training and competitions, Nike has decided to extend its limited exception allowing our athletes to compete in non-Nike Swift Swim technology," Stoyer told CNBC. "Nike is a company that exists to serve athletes – hence this limited exception to allow Nike swimmers to compete without distractions was the correct thing to do given the very unique circumstances."

"No one believes more than Nike that innovation is integral to helping athletes realize their full potential," Stoyer said. "Our medal winning Swim and Swift technology – has proven itself with 15 Olympic medals, 15 world records by US swimmers alone since Swift's Swim debut in 2003."

As record after record fell with swimmers wearing the Speedo LZR Racer -- 48 of 52 world records have come in the suit and all nine world records set at the U.S. Trials were from swimmers wearing Speedo -- more and more athletes started to believe that not wearing the suit would result in a disadvantage over their competitors who sported the brand.

Agent Evan Morgenstein, who represents two of the most high profile Nike swimmers -- Aaron Piersol and Brendan Hansen -- all but acknowledged that the switch would take place.

"I always appreciate Nike's willingness to have my clients wear whatever is right for them," Morgenstein said. "As far as I know, my clients will wear the same suit they wore at the trials."

Piersol and Hansen donned the Speedo suit for the Olympic tune-up. Hansen's top competitor, Japan's Kosuke Kitajima, who has a contract with Mizuno, also recently switched to the Speedo LZR.

Nike is one of those companies that not only pays top dollar to the greatest athletes in the world, they also make it their business to have those athletes using their top of the line apparent and equipment.

It's why Tiger Woods' contract doesn't require him to play with a Nike ball and clubs, but he still does. But the folks at Speedo have essentially built a suit in their LZR Racer that is so good that critics have alleged it to be technological doping. The full body suit was however approved by FINA, the international swimming governing body.

Nike will still benefit from potential wins by Piersol and Hansen because the two will still wear their Nike cap and goggles, but other companies have not reacted as positively.

Adidas is insisting that its home country Germany, which it has a $6.2 million contract with through 2009, wear their swimsuit despite outspoken comments from the team and their desire to go Speedo.

Swimsuit manufacturer Arena reportedly broke off its sponsorship deal with the Italian swim team earlier this week after their star Filippo Magnini switched from their brand to the Speedo variety.

Team China ditched Speedo after the Olympic Games in Athens in 2004 for Nike, though many Chinese swimmers have said that they haven't quite felt comfortable in the Speedo.

Tyr, the top competitor of Speedo in the serious swimwear market, has sued Speedo, as well as Swimmer Erik Vendt, who they claimed breached his contract and went to Speedo. Vendt has counter sued alleging that he was exercising the right in his contract to wear a suit, without breaking the contract, if the Tyr suit wasn't as good.

Tyr hasn't suffered that much in the consumer space. Their market share has leapt from 7.1 to 20.6 percent this year from last year, according to SportsOneSource, a market retail tracking firm.

Nike's market share has suffered -- swimsuits are down 7 percent from 17.5 to 10.6 percent in terms of dollars this year, while Speedo sales are up 9.3 percent to 62 percent of the market, according to SportsOneSource.

Speedo is so proud of its LZR Racer brand that it's even selling a T-shirt on Speedo.com. This despite the fact that the actual swimsuits, which retail for $550, have not hit stores yet. The company is however taking pre-orders and notes on the Web site that delivery will take place in late October.

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