ARMH Arm Holdings Plc ADS Each Representing 3 Ordinary Shares (MM)

LONDON—ARM Holdings PLC, the England-based tech firm that designs most of the world's smartphone chips, said Wednesday that it completed a $350 million acquisition of a computer-vision company, in a bet that it can further ARM's goal of getting its technology into new markets such as automobiles, robots and everyday household items.

ARM acquired Apical Ltd., a U.K.-based company that develops camera technology that lets electronic devices learn from their environments. For example, its technology can help a security camera distinguish between a human and cat.

Founded in 2002, Apical employs 100 people. The deal closed on Tuesday.

ARM doesn't manufacture chips itself but designs the blueprint of the microprocessors found in more than 95% of the world's smartphones. The company charges smartphone makers such as Apple Inc. and Samsung Electronics Co. an upfront licensing fee and royalties on the volume of smartphones shipped.

As the growth in global smartphone shipments slows—ARM expects an annual increase of 6% to 7% for the next five years—the company has diversified. It designs the No. 1 smartphone graphics chip and has steadily increased its share in the networking market, designing chips for base stations and Wi-Fi routers, for example. ARM is also in the early stages of designing chips for giant computer servers, in a challenge to industry leader Intel Corp.

ARM sees one of its biggest opportunities in what the tech industry refers to as the " Internet of Things," which involves connecting to the Internet everyday items such as automobiles and even household items such as lightbulbs.

All these objects will require chips, some of them very tiny, that can process information and send the data online. ARM wants to design the blueprint of these chips and, just as it does with its smartphone business, charge an upfront licensing fee and earn royalties every time someone purchases an item with an ARM-designed chip.

That is how Apical can help, said Mike Muller, ARM's chief technology officer. Apical has a similar business model to ARM: It doesn't manufacture anything itself but designs the blueprint for hardware that helps devices with displays or cameras be more efficient. Now ARM can use Apical's expertise to help it design better microprocessors and chips, and ARM can now also sell Apical's current designs alongside ARM's offerings.

"The acquisition makes sense strategically," said Jefferies analyst Robert Lamb. He said in the short term, ARM's smartphone business can benefit from Apical, which designs a tiny piece of hardware that helps displays adapt to changes in ambient light in an energy-efficient way. And in the long term, Apical's computer-vision technology can help ARM get its technology into Internet of Things devices with displays or cameras.

Imagine a home-security camera connected to the Internet, Mr. Muller said. It can automatically transmit live video to the homeowner whenever it detects motion, but that would take up a lot of power and bandwidth. Mr. Muller said with both Apical's software and hardware, which is a tiny block of silicon inserted into an ARM-designed microprocessor, the camera can learn to ignore pets and transmit video only when it detects a human.

Based in Cambridge, England, ARM is regarded as one of the U.K.'s top tech firms. Employing about 4,000 workers world-wide, it reported revenue of $1.5 billion for 2015, up 15% from 2014.

Write to Stu Woo at Stu.Woo@wsj.com

(END) Dow Jones Newswires

May 18, 2016 10:55 ET (14:55 GMT)

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