Microsoft's $22 billion AR headset deal with the U.S. Army could be in serious trouble

Hololens Us Army 2021 Microsoft Press
Hololens Us Army 2021 Microsoft Press (Image credit: Microsoft)

What you need to know

  • In March 2021, Microsoft announced it'd secured a deal to produce HoloLens-esque augmented reality headsets for the U.S. Army.
  • Since then, the project has seen hurdles and obstacles.
  • Now, according to a new report, Microsoft's $22 billion contract could be in jeopardy.

In March 2021, Microsoft announced it'd secured a contract to produce augmented reality headsets for the U.S. Army. The deal was valued at approximately $22 billion.

Since then, a lot has changed. The Integrated Audio Visual System (IVAS) project (the codename for the military-attuned HoloLens variant being developed) has seen delays, and the division within Microsoft responsible for the device is reportedly not in a good place, what with HoloLens 3 being canceled and teams unsure of their company's overall augmented reality strategy. All this has been happening against a backdrop of augmented reality experts hopping ship from Microsoft to Meta and other competitors, no less.

Now, in a new Insider report, it's detailed that delays were just the tip of the iceberg. Microsoft's IVAS ambitions apparently aren't going well, with some people "close to the project" fearing that the Army will ditch the deal altogether due to its current state.

The report indicates that Microsoft expects negative feedback on its submissions to the Army, knowing its IVAS units aren't where they need to be to please the customer. Congress also recently cut the contract's procurement funding, putting almost half of it "on hold," further impacting the stability of an already troubled deal. The amount left available to Microsoft, $405 million, is not enough for the company to recover its costs on what's being produced.

IVAS is due for field testing in May, so a negative outlook ahead of smaller testing events is less than ideal.

At the end of the report, it's noted that Alex Kipman, the creator of HoloLens, hasn't been happy with Insider's articles exposing internal dynamics at Microsoft, even though he publicly said "don't believe what you read on the internet" in response to those very same articles.

CATEGORIES
Robert Carnevale

Robert Carnevale is the News Editor for Windows Central. He's a big fan of Kinect (it lives on in his heart), Sonic the Hedgehog, and the legendary intersection of those two titans, Sonic Free Riders. He is the author of Cold War 2395. Have a useful tip? Send it to robert.carnevale@futurenet.com.

Read more
IVAS headset based on Microsoft HoloLens
Microsoft confirmed to dump $22 billion IVAS HoloLens project onto military tech firm via new partnership
Apple Vision Pro, cracked
Apple Intelligence will reportedly ship to the Vision Pro to boost its $3,500 value — as HoloLens marinates in the Microsoft Graveyard before its prime-time
SoftBank could steal Microsoft's title as the exclusive cloud provider and largest investor to OpenAI as $500B "Stargate" projects a $20B loss by 2027
Satya Nadella with Sam Altman at a conference
Salesforce CEO Marc Benioff's prediction about Microsoft and OpenAI's partnership may have just manifested — and it's not a pretty look for the ChatGPT maker
Marc Benioff, chief executive officer of Salesforce Inc., speaks during a keynote at the 2024 Dreamforce conference in San Francisco, California, US, on Tuesday, Sept. 17, 2024.
Salesforce CEO Marc Benioff claims Microsoft won't use OpenAI in the future — Microsoft already admitted GPT-4 is too expensive and isn't fast enough to meet consumer needs
Surface Pro 11
New Surface Pro details emerge as Microsoft prepares to downgrade Windows 10 and OpenAI is accused of cheating on AI benchmarks
Latest in Virtual Reality
Call of Duty: Modern Warfare II
Call of Duty: Modern Warfare 2 becomes the first 3D holographic gaming experience
Apple Vision Pro, cracked
Apple Intelligence will reportedly ship to the Vision Pro to boost its $3,500 value — as HoloLens marinates in the Microsoft Graveyard before its prime-time
A hand holding the Lenovo Legion Glasses 2 with the Windows Central CES 2025 badge
Lenovo's latest answer to XREAL AR glasses arrives sooner than you think
New XREAL One AR glasses showcasing its augmented capabilities.
The new XREAL AR glasses are what Microsoft HoloLens should've been: on-board spatial computing takes the new 'XREAL AR One' and 'One Pro' to the next level
IVAS headset based on Microsoft HoloLens
$22 billion Microsoft deal with U.S. Army could be in jeopardy unless the tech giant can get the price of its militarized HoloLens to be "substantially less than" $80,000 per unit
Microsoft HoloLens
It's over. Microsoft discontinues HoloLens 2, ending its foray into VR.
Latest in News
Cloud servers
Microsoft has killed "several" data center projects in the U.S. and Europe, according to reports — Microsoft responds (Updated)
Photo of Microsoft's new sign-in page for Xbox.com using the Microsoft Edge browser.
Over one billion users will get a new Microsoft user experience, and it has a dark mode
The Thing: Remastered key art
The Thing comes to Xbox Cloud Gaming's "Stream Your Own Game" library alongside other new arrivals
Promotional screenshot of heroes fighting a giant in Pillars of Eternity
Obsidian's classic Baldur's Gate successor 'Pillars of Eternity' is getting a surprise turn-based mode later this year, alongside other updates
Atomfall
Atomfall reviews and Metacritic scores are in: Here's a roundup of what everyone's saying about this new Game Pass survival game
Screenshot of one of the new flat world presets in Minecraft.
Minecraft testing new flat world presets and a better way to locate your friends in-game