By Sarah E. Needleman 

Microsoft Corp. has agreed to build custom augmented-reality headsets for the U.S. Army in a deal worth up to $21.9 billion, expanding the technology company's role as a major government supplier.

The devices will be based on Microsoft's HoloLens headset that made its debut in 2016, the company said in a blog post Wednesday. More than 120,000 units of the custom gear will be delivered over a 10-year period and supported by Microsoft's Azure cloud-computing service. The headsets will help keep America's soldiers safer and make them more effective, Microsoft said, in part by enhancing their situational awareness and providing training opportunities.

In a statement, the U.S. Army called Microsoft an "industry leader in developing innovative technology" and its partnership with the company "illustrates areas that the Department of Defense and industry can work together toward achieving modernization priorities in the interest of national security."

CNBC earlier reported the deal's value.

Augmented reality, known as AR, overlays digital content onto a person's view of the real world. AR headsets have been gaining popularity as a resource for workers in industries such as retail, healthcare and automotive manufacturing. Microsoft competes in the space with several dozen companies, including Alphabet Inc.'s Google and Magic Leap Inc.

The technology industry considers AR the next major computing interface. Facebook Inc. earlier this month announced plans to make AR glasses for consumers and this week "Pokémon Go" creator Niantic Inc. hinted that it is developing a pair as well.

Microsoft has struck deals to provide products and services to the U.S. government before. In 2019, the company won a landmark cloud-computing contract with the Pentagon worth up to $10 billion over the next decade, beating out Amazon.com Inc., which had been widely seen as the front-runner. Also that year the U.S. government awarded a 10-year $7.6 billion Pentagon contract to General Dynamics Corp. that included replacing existing IT systems with Microsoft's Office 365.

The new deal with the U.S. Army comes after Microsoft in 2018 won a $480 million contract to supply it with 100,000 HoloLens headsets. With new devices designed specifically for soldiers, "the suite of capabilities leverages existing high-resolution night, thermal, and Soldier-borne sensors," the Army said. The headsets will also help soldiers make informed decisions as they confront current and future adversaries, it said.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

 

(END) Dow Jones Newswires

March 31, 2021 17:05 ET (21:05 GMT)

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