The Roku Company:Rankings Based on Cost, Value & Revenue - Essay Sample

Short Summary

The ranking of these companies is based on their value, potential to generate revenue, and expenses that can be incurred to acquire them. They are in the information technology industry, and they are based in the United States, a market with the greatest views in the world. On the part of revenue potential, America Movie Channels makes over $2.7 billion in annual revenue, and this means it the highest-ranked organization in this sector. High revenue levels tend to attract potential investors, and this is a move that raises a business’s financial capability for future expansion and growth.

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Total Industry for Potential Acquisition

The Roku Company has a quarterly earning level of $400 million, and the forecasted annual earnings may reach $1.6 billion, and this means that it is the second-ranked firm on the category of revenue potential. The third entity is Shondaland, considering that it has minimum annual returns in comparison to the other two organizations, for it makes $100 million. However, the figure should not scare away investors since the sector is on an upward trend of growth due to the support it is getting from technology advancement.

It is assumed that when an entity can make more revenue than another, the costs of acquiring it will also rise. Therefore, the same ranking adopted in the case of the potential to generate revenue is also applied. There are no changes in order when categorized based on their total value to the technological industry. A business with the highest revenue level in a given fiscal period is expected to generate the highest value to the industry. Therefore, the ranking is the same in all the three cases with American Movie Channel ranking first, followed by Roku while Shondaland is the entity in position three. The ordering of AMC is also supported by the fact that it has diversified its investments, for it is generating funds from advertising and carrier fees (Cassagnol, 2018). The earnings of Shondaland vary based on the contracts that the manager gets, and this makes it an unattractive investment to undertake. The most crucial elements that were utilized in facilitating the ranking process is the amount of annual revenue earned by each business. Additionally, there is also the consideration of business diversification and earnings stability.

The technological industry in the United States is mainly relying on artificial intelligence, edge, and clouding computing to advance its activities, and this has provided it with an opportunity to continue developing and growing in a great way. The sector has experienced a significant reduction in bandwidth costs and latency issues. Cloud adoption will be on the rise, and the entities will work on embracing flexible consumption through multicloud and hybrid environments (Mithas et al., 2017). The global information technology industry is poised to hit the annual revenue level of $5.2 trillion in the year 2020. The United has the largest sector globally, covering 32% of the world total, and it is estimated that its total annual earnings for 2020 will reach the $1.7 trillion mark (Makada et al., 2019). Therefore, based on the earnings made by the AMC, Ruko, and Shondaland, it is clear that they are playing a significant role in the growth of the sector, for they are contributing a sizeable portion of the earnings made by the American industry. The United States technological sector tends to have a strong impact on the county’s gross domestic products, and this shows the importance of the three organizations to the economy of this nation. The three entities have significant dollar amounts that are supporting the United States economy and the technology sector at large.

Revenue Trends in the Information Technology Industry

The information technology industry in the United States has experienced tremendous growth over the years with improved revenue levels enabling it to become the largest in the world. The sector has significantly contributed to the GDP and raises labor productivity. The United States economy has managed to remain at the top in this regard. The diagram below shows the level of revenue that the industry has been making over the years in the United States and in comparison to other parts of the world.

Figure 1: Industry Contributions to Changes in Real Gross Domestic Product

It is clear that there has been a rising trend of revenue growth, and it is expected that the advancement in technology and continuous use of artificial technology will help to propel the industry further. Based on the details provided for the fiscal year 2018, it was estimated that the industry will earn $351 billion, and this would account for arund3.9% increases to what the sector had made in 2017 (Makada et al., 2019). The consumer spending on video and music streaming in the same period would account for $19.5 billion of the total revenue earnings, and this would be a 35% increase to the figures posted in 2017. In general, the aggregate earnings for the information technology industry in 2018 experienced an increase of 2.2%, which is significant growth, considering that there exist many factors in the market that influence it (Makada et al., 2019). An increase in the emerging technologies is an issue that has played a significant role in the growth of the sector, and some of the devices that are supporting the growth process include smart speakers, smart homes, virtual reality, wearable, and drones.

Financial Stability

The industry is financially stable, considering that it is playing a significant role in the growth of the general economy. In the United States, the information technology sector is making a huge contribution to the gross domestic product, and this is a clear indication that the sector is stable. The AMC Company has a viewing of more than 98 million people, and as a single entity having this wide client base is a testament that the industry has a vast potential to earn more revenue. Having an annual revenue level of $2.7 billion is no mean feat despite the decline in the subscriptions and revenue amount. The fact that these companies are trading in the NASDAQ shows that they have the financial muscle to compete with others in the same industry. It is not possible to find firms that are struggling financially getting registered in the stock exchange. One of the requirements for firms joining the market is to ensure that they have a certain amount of capital (Mithas et al., 2016). Therefore, the financial stability of the information technology industry should work towards attracting potential investors in the market. Any of the three organizations will prove to be a profitable investment despite them having different earning capabilities.

References

Cassagnol, D. (2018). 2018 Tech Industry Revenue to Reach Record $351 Billion, Says CTA. Businesswire. Retrieved from https://www.businesswire.com/news/home/20180107005125/en/2018-Tech-Industry-Revenue-Reach-Record-351

Makada, H., Kwadwo, F., and Hao, S. (2019). Trends in the Information Technology sector. Brookinglings. Retrieved from https://www.brookings.edu/research/trends-in-the-information-technology-sector/

Mithas, S., & Rust, R. T. (2016). How information technology strategy and investments influence firm performance: Conjecture and empirical evidence. Mis Quarterly, 40(1), 223-245. https://doi.org/10.25300/MISQ/2016/40.1.10

Mithas, S., Whitaker, J., & Tafti, A. (2017). Information technology, revenues, and profits: Exploring the role of foreign and domestic operations. Information Systems Research, 28(2), 430-444. https://doi.org/10.1287/isre.2017.0689