ARM Holdings (NASDAQ:ARMH) just bought itself some additional know-how in the graphics-processing business. Last week, the company announced its purchase of Geomerics, an industry leader in lighting technology for mobile gaming and entertainment.
ARM investors should see the acquisition as a positive move toward further mobile-graphics processing for the company, and a way to keep up with the mobile-gaming trend.
Strong processing, but room for graphics growth
ARM's chip designs are a used by tech companies for their mobile devices, but when it comes to graphics processing in higher-end devices, ARM typically loses out.
That's where Geomerics comes in. The company's graphics-lighting technology, called Enlighten, provides game makers with an easy way to include dynamic-lighting graphics on consoles, PCs, and mobile platforms. One of its major customers has been Electronic Arts, which used the tech in some of its Battlefield, Medal of Honor and Need for Speed games. Enlighten allows for photo-realistic lighting in 3-D graphic environments and by including compound reflections, refractions, and shadows.
Geomerics has worked with ARM for the past two years, and the companies found that some of their graphics pursuits overlapped or were complementary, so ARM decided to buy the company. Though Geomerics will continue working for its clients, ARM will be able to use the technology to expand its mobile-graphics pursuits.
This type of purchase is part of a larger trend in the mobile space, with applications-processor companies expanding into graphics capabilities, and vice versa. ARM's current graphics lineup, Mali, is used for lower-end graphics in smartphones and tablets, but the acquisition could help push it toward the higher-end devices. As PCWorld pointed out, ARM's processors are in mobile-gaming devices like the Sony PlayStation Vita, but its graphics competitor Imagination Technologies makes the graphics processor for the device.
Foolish final thoughts
As more companies converge on graphics and applications processing, this move looks like a smart one for ARM. Mobile gaming is already a huge business -- and it's still growing. Gartner recently reported that revenue from the mobile-gaming industry will increase from $13.2 billion this year to more than $22 billion by 2015.
While there's no guarantee ARM will grab new graphics-processing customers from the acquisition, the move helps the company position itself better against its competitors and start moving further into a growing mobile trend. Investors should be on the lookout for how ARM implements Geomerics' technology into its existing processors and if other device makers see it as a big enough upgrade from ARM's current graphics offerings.
Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Gartner. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.