Microsoft Divests $22 Billion U.S. Army Contract

Microsoft (MSFT) is transferring its $22 billion U.S. augmented reality headset program for the U.S. Army to startup company Anduril Industries.

The partnership still needs approval from the U.S. Department of Defense.

If approved, Anduril will oversee production and delivery of the U.S. Army’s “Integrated Visual Augmentation System” program, the companies said in a news release.

The headset program is intended to improve capabilities such as night vision for U.S. Army soldiers.

Microsoft won a 10-year contract worth $22 billion U.S. to build more than 120,000 custom HoloLens headsets for the Army in 2021 but discontinued production last year.

Now it looks like the headset program is being revived with Anduril as the lead contractor. Microsoft will continue to provide cloud and artificial intelligence (A.I.) capabilities for the project.

The U.S. Army contract comes at a key time for Anduril. The startup company has been in negotiations aimed at raising up to $2.5 billion U.S. in funding.

Anduril also has a partnership with OpenAI and is building a manufacturing facility in Ohio.

Since its founding in 2017, Anduril has been working to enter the defense sector space that is dominated by companies such as Lockheed Martin (LMT) and Northrop Grumman (NOC).

Anduril’s founders previously sold the Oculus virtual reality (VR) headset startup to Meta Platforms (META) for $2 billion U.S.

Microsoft’s stock is flat over the last 12 months, having risen less than 1% to trade at $411.44 U.S. per share.