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The World Of Ferrari

Into the bizarre, often tacky, lowest-common-denominator world of the theme park steps a new player. Having mastered Formula 1 and the supercar, Ferrari is getting into the family-fun business.

The tifosi are, to say the least, perplexed. For decades, we have desired Ferrari because it has won world championships and built cars with inspired, intricate engineering and pornographic visual appeal. But for years, other than doing what it did best, Ferrari did absolutely nothing to encourage that desire. Quite the opposite: Enzo Ferrari was famously dismissive of those who bought his road cars, regarding them as the dupes who paid for his racing. Ferrari doesn't advertise or sponsor celebrities or, until now, attempt in other ways to persuade us to want it. Mystique doesn't work that way. There was good business sense in the Old Man's rudeness; pretty girls call it playing hard to get.

The money Ferrari makes from activities other than racing and carmaking -- activities that feed off its storied reputation, rather than burnishing it -- is growing. The Ferrari World theme park in Abu Dhabi is the company's latest, most visible, and most controversial "brand extension," but there is a dizzying array of others. The average client now spends around $25,000 customizing his car with Ferrari's "personalization" service. Clients can buy and run an old Formula 1 car with the Corse Clienti program, play at being a factory test driver with the FXX and 599XX programs, do a season's racing in an F430 Challenge, have their vintage Ferraris restored at the factory's Classiche department, learn to drive better on a Pilota course, and choose from a range of lavishly tooled and immensely expensive accessories.

For the fans (clients buy cars, fans buy coffee mugs, and Ferrari's marketing effort makes a clear distinction between the two), there are Ferrari-licensed netbooks from Acer, goggles from Nannini, and bicycles from Colnago as well as perfumes, jewelry, and kids' schoolbooks. Nearly forty Ferrari stores in city centers and airport departure lounges around the globe sell an astonishing range of Ferrari-branded official merchandise, from the expected mugs and T-shirts to the bizarre: deodorant, surfboards, and race-suit-style infant sleepers.

The risk is that by being a little less aloof and a little more ubiquitous, Ferrari might tarnish that famous brand and make us want its cars a little less. And the strength of Ferrari's brand, and what it does with it, is of immediate importance. Morgan Stanley values Fiat Auto, which manufactures more than two million cars each year and makes about an $800 million profit, at $3.9 billion. It values Ferrari, which is 90 percent owned by Fiat and makes more than 6000 cars each year and about $400 million in profit, at $4 billion. That's partly due to the bankers' belief that Ferrari's profits will grow, but it's also partly due to what one called the "magic dust" of the brand.

Those numbers aren't just academic. Fiat is seriously considering a Ferrari IPO to raise the cash to take control of Chrysler. You might not be able to afford the cars, but you might like to buy your own little slice of the company. But what will you be buying? What is Ferrari? Is it a Formula 1 team and a supercar maker, or is it a marketing machine?

Knowing how much it earns from each activity would give us the answer, but Ferrari won't tell, and nobody else knows. "We know exactly how much the other activities are worth, and it is significant," said Ferrari managing director Amedeo Felisa when I asked him. "But if I told you how, you'd be able to work out how much we make on the road cars and how much Formula 1 costs us. And then I'd lose my job, and I have a family."

Max Warburton, the respected London-based automotive analyst with Sanford C. Bernstein and a man known to have the ear of Fiat CEO Sergio Marchionne, doesn't know, either. "They've never revealed it. Some people talk about Ferrari's noncar activities now being 30 percent of its revenues, which seems on the high side to me, but it could be that this new theme park is a game changer."

However the numbers break down, they look good. In the third quarter of 2010, the last period for which Ferrari reported, car sales were up four percent over the same period a year ago, but overall revenue was up thirteen percent and profit 46 percent. Investors seem to like those numbers. Volkswagen's Ferdinand Piëch, sitting, in Warburton's words, "on a $20 billion cash pile they acquired by a combination of luck and judgment and don't know what to do with," wants to buy it outright, despite already owning Porsche, Lamborghini, Bentley, and Bugatti. The Middle Eastern sovereign wealth funds are also interested in acquiring another trophy asset. They don't seem to care whether Ferrari sells more cars or baby clothes. But we do.