In this video, Austin Smith describes Apple's big opportunity: its iPhone. An unsubsidized iPhone costs about $650, but most people pay around $200 for an iPhone, and if a carrier doesn't subsidize the smartphone, customers will go to someone who will. This results in a profit margin 10 times greater than the margin for PCs. The smartphone market continues growing, and although Apple might lose market share, Austin says, its popularity and carrier subsidies allow Apple to gain great profit margins. Consequently, Apple enjoys a great cash balance to work with for future projects and innovations.

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Austin Smith owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.