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How Apple Inc. Goes From a Product to a Platform Company

Today, Apple 's (NASDAQ: AAPL) revenue comes primarily from products. The iPhone, in particular, provides most of the company's top line, accounting for 69% of total revenue in its first quarter of fiscal 2015. Since product revenue is inherently less predictable than service revenue, Apple tends to trade at a lower price-to-earnings ratio than platform peers such as Google and Microsoft . While Apple's recent increase in stock price has matched the company's P/E to Microsoft's, at 17 it still lags significantly behind Google's ratio of 28.

While it could be argued Apple is already more of a platform company than the market admits given the loyalty of its customer base; the breadth of its ecosystem of products, software, and services; and its substantial pricing power, a growing services segment will only bolster the sustainability of the business and make it more of a platform company than ever before.

Chart source: AppleInsider.

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The article How Apple Inc. Goes From a Product to a Platform Company originally appeared on Fool.com.

Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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