Microsoft wins U.S. Army contract for augmented-reality headsets, worth up to $21.9 billion over 10 years

Source: CNBC

By Jordan Novet, who is a CNBC technology reporter specializing in artificial intelligence, cloud computing, and Microsoft and other enterprise software companies and products.

KEY POINTS

  • Microsoft will deliver to the U.S. Army over 120,000 devices based on its HoloLens augmented-reality headset.
  • The deal, which could be worth as much as $21.88 billion over 10 years, follows a contract Microsoft received to build prototype headsets for the U.S. Army.
  • The contract comes a year and a half after Microsoft won a cloud contract from the Pentagon that could be worth up to $10 billion.

The Pentagon announced that Microsoft has won a contract to build more than 120,000 custom HoloLens augmented-reality headsets for the U.S. Army. The contract could be worth up to $21.88 billion over 10 years, a Microsoft spokesperson told CNBC on Wednesday.

Microsoft shares moved higher following the announcement.

The deal shows Microsoft can generate meaningful revenue from a futuristic product resulting from years of research, beyond core areas such as operating systems and productivity software.

It follows a $480 million contract Microsoft received to give the Army prototypes of the Integrated Visual Augmented System, or IVAS, in 2018. The new deal will involve providing production versions.

The standard-issue HoloLens, which costs $3,500, enables people to see holograms overlaid over their actual environments and interact using hand and voice gestures. An IVAS prototype that a CNBC reporter tried out in 2019 displayed a map and a compass and had thermal imaging to reveal people in the dark. The system could also show the aim for a weapon.

“The IVAS headset, based on HoloLens and augmented by Microsoft Azure cloud services, delivers a platform that will keep soldiers safer and make them more effective,” Alex Kipman, a technical fellow at Microsoft and the person who introduced the HoloLens in 2015, wrote in a blog post. “The program delivers enhanced situational awareness, enabling information sharing and decision-making in a variety of scenarios.”

The headset enables soldiers, fight, rehearse and train in one system, the Army said in a statement. The Pentagon did not immediately respond to a request for comment.

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