Microsoft wins the U.S. Army contract for augmented reality headsets

April 5, 2021: -On Wednesday, the U.S. Army said Microsoft had won a contract to build over custom HoloLens augmented reality headsets. The contract for above 120,000 headsets could be worth up to $21.88 billion over ten years, and a spokesperson from Microsoft told CNBC.

Microsoft shares increased after the announcement. The stock raised 1.7% to $235.77 per share at the end of Wednesday’s trading session.

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

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

The standard-issue HoloLens, costing $3,500, enables people to see holograms overlaid over their virtual environments and interact using hand and voice gestures.

“The IVAS headset delivers a platform that will keep soldiers safe and make them more effective,” Alex Kipman, a person at Microsoft, wrote.

The deal will make Microsoft a stronger technology supplier to the U.S. military. Microsoft secured a contract to provide cloud services to the Defense Department in 2019, beating out Amazon, the public cloud market leader. Amazon has been challenging the agreement, which could be worth nearly $10 billion, in federal court.

Few Microsoft employees wanted the company to hold off on submitting for the cloud contract, and a group of employees called on Microsoft to cancel the HoloLens contract. “We did not sign up to develop weapons, and we demand a say in how our work is used,” the employees said in an open letter about the HoloLens contract.

 Microsoft CEO Satya Nadella defended the Army augmented reality project after some days and told CNN that “we made a principled decision that we’re not going to withhold technology from institutions that we have elected in democracies to protect the freedoms we enjoy.” Meanwhile, the Army has suggested the augmented reality technology could help soldiers target enemies and prevent the killing of civilians.