At and T

AT&T has seen tremendous changes to its industry in the last ten years, including the rise of mobile services that have greatly expanded the use of data by AT&T customers. This has in turn provided the company with significant retail opportunities, since it is now a vendor of mobile devices and this has become the major income driver for the company. However, this technology also requires substantial investment in infrastructure, which offsets some of the gains.

The financial performance going back ten years for AT&T is reflected in the following ratios, where are derived from figures gathered from the firm's annual reports: Current Ratio Cash Ratio Gross Margin Operating Margin Net Margin LT Debt/Equity Debt Ratio ROE ROA These figures show that in general, AT&T has been a successful company. Over the past ten years, the general trend is that the company is getting larger. For example, revenues in 2003 were $34 billion and in 2012 they were $127 billion.

The same trend exists with the size of the company. In 2003, the total assets for AT&T were around $48 billion. Today, total assets are around $272 billion. These dramatic size increases owe much to the rise of mobile technology. The first generation iPhone was introduced, with AT&T having exclusivity over the product in the United States in June, 2007.

While the Blackberry and Palm -- the former in particular -- were popular predecessors to the modern smartphone, the mobile revolution was kicked off for all intents and purposes with the launch of the iPhone. AT&T's revenues increased 88% that year from $63 billion to $118 billion, a level from which it has only moved slightly. Once the mobile revolution began, AT&T has actually not seen much revenue growth, because it captured so much of the market right away.

It should be noted that this spike in revenue was not related to an acquisition -- the company's total assets grew in 2006 but not 2007. In 2006, AT&T nearly doubled in size through acquisitions. The broad trend in the ratios is that AT&T's ratios worsened for a time around when it was growing rapidly, but have begun to improve in recent years. The first category that will be examined is the liquidity ratios. These peaked in 2003, when they were at a relatively healthy level.

There was a general decline in the health of AT&T, in liquidity terms especially, during the mid-2000s, perhaps related to increased infrastructure spending and reorganization. The company has since that point begun to increase its liquidity. While its current ratio today is not at a great level, it is healthy, given how much of its revenue is tied to contracts, and the cash ratio is healthy. The company's margins have declined in recent years.

Stronger ten years ago by far, the margins held up during the 2000s but in the past couple of years have begun to deteriorate. This is due to high costs, as AT&T has held its gross margin relatively stable. The operating and net margins have declined, however, to their worst levels of the past decade. This should be cause for some concern among investors. The amount of leverage that AT&T has is comfortable.

Both its long-term debt to equity ratio and the overall debt ratio are healthy and the company appears to have control of these. There is no evidence in the financial statements that would indicate that AT&T is borrowing when it would prefer not to, or that it has any problems with meeting its capital obligations. Finally, AT&T has been able to turn healthy investment returns for the most part. The company's ROE and ROA figures were stronger in the past, but are still acceptable.

As with the net margin, however, there is concern that the investment returns are at low levels. The good news is that they appear to have bottomed out in 2011, and were higher in 2012. If this upward trend continues there is little concern for the company's health in 2013. In conclusion AT&T has performed acceptably.