For the last 15 years, Internet television company Roku Inc. has done one thing and done it well.
Its streaming sticks, boxes and software make it easy and enjoyable to watch Internet content on a television — a seemingly simple task, but one that its largest rivals have struggled to perfect.
“I like to call Roku the Little Engine That Could in that I always see it come out on top of other devices like AppleTV or Chromecast,” said Mike Vorhaus, president of Magid Advisors, a consumer research firm.
But Roku is now inching closer to a crucial junction. The Wall Street Journal reported Thursday the company could seek an initial public offering of stock at a valuation of roughly $1 billion before the end of the year. Roku declined to comment.
An IPO would bring great attention to Roku, which despite its success is not yet a household name, Vorhaus said. “You hear ‘Roku,’ and to the average person it sounds like a sushi restaurant or something,” he said. “But it is definitely an insider’s brand in terms of the buzz surrounding it.”
Roku announced this year that it brought in $400 million in revenue in 2016 — $100 million of it from the company’s media and licensing unit, which includes ad sales on its streaming platform.
The Los Gatos, Calif., company has raised around $210 million in funding from investors including News Corp, Fidelity Investments, Menlo Ventures, Hearst Ventures, Viacom, Fox Networks and Netflix, according to Crunchbase. The company is in the midst of an additional fundraising, Fortune reported this year.
“They have a number of large investors and most of those guys are probably looking for their payday,” Paxton said.
Employees and venture capitalists “want to realize the benefit of all their hard work,” said Brett Sappington, senior director of Park Associates. “I’m sure they’d love to build a house on the beach and live there and in order to do that the company would need to be bought out or head for an IPO.”
Another way to reward early investors would be an acquisition, but Paxton said Roku’s leadership, including founder and Chief Executive Anthony Wood, has never looked to sell the company outright. The business plan has always been to gain market share and go public.
“For them it was more matter of timing in terms of when they wanted to go public rather than if they wanted to do it,” Paxton said. “It seems like a good time for them.”
Paxton sees similarities between Roku and TiVo, as both companies started in hardware before expanding into software. But he said he doesn’t see Roku seeking a buyer, as TiVo did when it was sold last year to Rovi in a $1.1-billion deal (Rovi now operates under the name TiVo Corp.).
Another analyst said investors may wind up comparing Roku to action camera firm GoPro and fitness wearable maker Fitbit — whose stocks haven’t wowed after their Wall Street debuts.
“FitBit and GoPro are both high-growth consumer tech companies that had explosive growth and both underperformed in the long run,” said Matt Kennedy, an analyst at Renaissance Capital. “The product has the potential to be seen as a fad that saturates the market for a time, then dies off.”
Kennedy said that Roku’s shift in focus in recent years toward software and advertising could reassure investors ahead of an IPO. A viable advertising business could help offset concerns that hardware sales could decline or that rivals — Apple and Google among them — could edge in on its business.