Microsoft Nabs $20-Plus Billion Army Contract For Augmented Reality Headsets

The deal elevates Microsoft's position as a top technology manufacturer for the U.S. military.


The U.S. Army has awarded Microsoft with a contract to build and deliver more than 120,000 augmented reality devices over the next 10 years. The new deal could be worth up to $21.88 billion and follows another deal from a year and a half ago when Microsoft was granted a potential $10 billion cloud contract from the Pentagon. The devices will be based on the HoloLens headsets.

Each HoloLens headset costs $3,500 and allows people to view and interact with holograms in their environments. Users can employ voice and hand gestures to connect with the holograms.

The futuristic product took years of research by Microsoft. Microsoft was already granted a $480 million deal from the Army in 2018 to develop prototypes of an Integrated Visual Augmented System, better known as IVAS.

Alex Kipman, a Microsoft technical fellow and a HoloLens writer, said: “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. The program offers enhanced situational awareness, enabling information sharing and decision-making in a variety of scenarios.”

According to the U.S. Army, the headset offers one system that allows soldiers to train, rehearse, and fight.

The contract means Microsoft is fast becoming a top technology manufacturer and supplier for the military. Microsoft has competed with and beat out Amazon for past deals. Amazon is challenging one of the contracts in federal court.

A few Microsoft employees were skeptical about the cloud contract and even asked them to cancel its HoloLens deal. The employees wrote a letter about the HoloLens deal, saying: “We did not sign up to develop weapons, and we demand a say in how our work is used.”

But Satya Nadella, CEO of Microsoft, defended the company’s position, saying, “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.”

The Army has also upheld its decision, saying that the technology can prevent accidental civilian killings and help soldiers better target their enemies.

After the announcement about the Microsoft-Army deal, Microsoft shares were higher. By 4:30 p.m. on Wednesday, Microsoft’s stock was 3.92 percent higher at $235.77 per share.


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