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Microsoft $22 Billion U.S. Army Deal for HoloLens Advances

(Bloomberg) -- Microsoft Corp.’s multibillion-dollar deal to build customized versions of its HoloLens goggles for the U.S. Army is moving forward, one year after the Senate considered freezing half the contract.

The deal, initially unveiled three years ago, is now worth as much as $21.9 billion over 10 years, according to Microsoft. The agreement runs for an initial five years, with an option to add another five years. The software maker will manufacture the augmented-reality devices in the U.S. The Army announced the contract Wednesday on its website.

Microsoft shares jumped as much as 3.1% on the news and closed at $235.77 in New York.

The initial commitment includes outfitting the Army’s entire Close Combat Force, more than 120,000 soldiers, Microsoft said. The contract also includes some Azure cloud services.

The program, known as the Integrated Visual Augmentation System, or IVAS, aims to develop a “heads-up display” for U.S. ground forces, similar to those fighter pilots use in the cockpit. The system would let commanders project information onto a visor in front of a soldier’s face, and would include other features such as night vision. In October 2018, the U.S. Army awarded Microsoft a $480 million contract to adapt its HoloLens AR headset, a set of goggles that overlay holograms on top of a user’s field of view, for the program.

The headset “delivers a platform that will keep soldiers safer and make them more effective,” said Alex Kipman, a Microsoft Technical Fellow, said in a blog post shared by email. “The program delivers enhanced situational awareness, enabling information sharing and decision-making in a variety of scenarios.”

Microsoft has been hawking HoloLens devices to corporate customers for things like remote repairs and training and to educational institutions for holographic classes. Last month, the company unveiled new software that aims to spread the benefits of augmented and virtual reality to a wider swath of customers, including consumers, who can’t pay several thousand dollars per device and for an expanded array of uses like corporate meetings and entertainment events.

The project with the Army has been opposed by some Microsoft employees who have protested the use of the technology for combat.

The Army used a fast-track buying method known as “other transaction authority” to side-step much of the red tape typically involved in a deal of this size. It chose Microsoft after reviewing several proposals, including one from competitor Magic Leap Inc.

The Army didn’t return a call seeking comment about the value of the deal.

(Updates with number of devices in fourth paragraph.)

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