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Ferrari revs up ahead of IPO

The company promotes cachet beyond the cars themselves.

MILAN, Italy - Ferrari's sleek sports cars and souped-up Formula 1 racing machines have made the prancing horse logo among the world's most powerful brands. Now, as the company prepares for a public listing, it wants to cash in on the cachet.

The aim: position Ferrari not just as a carmaker, but as a luxury goods company. Think Armani, Hermes ... Ferrari.

Analysts say that could mean refining its line of merchandise or creating a chain of exclusive clubs and hotels catering to Ferrari owners and the wealthy.

Chairman Sergio Marchionne will present his vision to investors in the coming weeks, but the potential already has the two worlds spinning in anticipation.

The made-in-Italy luxury goods sector is abuzz over whether Marchionne's ambition could facilitate the creation of an alliance of high-end producers, one that might stand up to the French conglomerates like LVMH, while financial analysts are crunching numbers on the brand's potential value.

'Truly a luxury brand'

"I actually think cars are almost incidental to Ferrari," Marchionne said last month when announcing plans to spin off Ferrari from its mass-market parent Fiat Chrysler Automobiles NV. "It sounds sacrilegious. But it is truly a luxury brand."

Persuading the investing community of that distinction could significantly multiply Ferrari's market value by putting Ferrari among a category of companies that squeeze value not just out of the quality of the materials and products, but also their allure.

Marchionne has room to leverage.

Although Ferrari's brand has been named the world's most recognizable for two straight years in a survey by London-based consultants Brand Finance, it is only 350th in value, around $4 billion.

Lifting that figure is Marchionne's goal between now and the IPO, due in the second or third quarter next year.

A surge in Fiat's share price by as much as 30 percent since the Ferrari spinoff was announced indicates the potential of the deal, although most analysts aren't buying Marchionne's estimate that Ferrari is worth $12.5 billion.

Revenues vs. status

Getting a higher valuation is a tricky balance between finding new sources of sales to increase revenues and protecting the brand's exclusivity.

"If you think of the capacity of the Ferrari brand in the luxury space, there are many avenues you can take from a product perspective," said Anil Valsan, an automotive analyst. "But at the same time, you have to be very careful about not damaging the brand. It is absolutely critical that the brand's value is not lost by diversifying into too many products."

Currently, the company's revenue stream is limited by the fact that it keeps car sales to just 7,000 a year to retain an aura of exclusivity. Also, manufacturing high-performance engines and race cars is more capital intensive than, say, fashion.

Ferrari could take a gamble and expand its range of car offerings to include SUVs, a well-performing segment globally. That would bring its automotive portfolio closer in line with competitors Porsche or Bentley. Lamborghini, another Italian sports car maker, has previewed a concept SUV.

Already, the brand presents itself as a luxury producer, with such services as an on-site atelier for Ferrari buyers to customize their cars and a racetrack for Ferrari owners' test drives.

But analysts say there is more the company can do to monetize that image. One strategy could be creating an exclusive Ferrari club that could eventually be expanded to hotels catering to Ferrari owners and very wealthy people, said Brand Finance executive Robert Haigh.

In addition, the Ferrari World theme park - which is being expanded from Abu Dhabi to Barcelona, Spain - could be taken global, capitalizing on Ferrari's reputation for cutting-edge technology, he said.

And while Ferrari is already selling branded fashion items, not all products bearing the Formula 1 Scuderia logo are of the same high quality.

"There are Ferrari caps, rubbish jackets, and watches that are not necessarily expensive or well-made," Haigh said. "They are not necessarily protecting the Scuderia brand the way they should be."