Microsoft’s Mixed-Reality Dreams Are Fading

Microsoft’s Mixed-Reality Dreams Are Fading
Contributor: Phillip Tracy

One of the most outspoken proponents of the metaverse is struggling to find its place in this hypothetical virtual world. Microsoft has reportedly scrapped plans to make a HoloLens 3 — what would have been a successor to its current mixed reality headset — and infighting within the mixed reality division has fuelled uncertainty about its future, according to Business Insider.

One source told Insider that the decision to abandon plans for a HoloLens 3 would mark the end of the “product as we know it.” Multiple sources said Microsoft had agreed to partner with Samsung to develop a new mixed reality device, a decision that has reportedly “inflamed” division within the team. One employee called the partnership a “shit show.” Insider spoke to 20 current and former employees at Microsoft who described “confusion and strategic uncertainty.”

Some folks within Microsoft believe the company should continue to make hardware while others favour pivoting to a software platform for the metaverse — that is, a Windows for the digital world. There is also a question of which customer base to target. Microsoft employees are apparently split on creating hardware and software for consumers or continuing their focus on enterprise customers. HoloLens 2, the company’s latest AR/VR hardware, is a commercial product that sells for $US3,500 ($4,859).

Rubén Caballero, a former Apple executive who was hired in 2020 to join the mixed reality and AI division, reportedly wants to shift focus to consumers and the metaverse. Others within the team believe they should continue selling to businesses, and even fulfil military contracts.

Microsoft’s Mixed-Reality Dreams Are Fading
Photo: Alex Cranz/Gizmodo

In 2018, Microsoft secured a $US480 ($666) million contract when the military purchased 100,000 HoloLens headsets, believing it could provide “increased lethality, mobility, and situational awareness necessary to achieve overmatch against our current and future adversaries.” Microsoft employees protested the contract, and sent a letter to Microsoft CEO Satya Nadella and President Brad Smith, stating the deal had “crossed the line” and that they “did not sign up to develop weapons.” The IVAS contract with the U.S. Army could net Microsoft up to $US22 ($31) billion but was postponed because the technology doesn’t meet the intended goals.

LinkedIn profiles show that at least 25 Microsoft employees working on mixed reality left to join Meta last year alone, and Wall Street Journal reports the team lost around 100 people in 2021, many of them to Facebook’s parent company. The HoloLens team is now uncertain about the long-term goals of the project and whether they will transition to working on a software platform.

Disagreement on what to do next has made HoloLens’s future unclear, though Microsoft maintains its commitment to the headset and promises to release more products in the future, “Microsoft HoloLens remains a critical part of our plans for emerging categories like mixed reality and the metaverse,” said Microsoft spokesman Frank Shaw. “We remain committed to HoloLens and future HoloLens development.”

Microsoft was one of the first companies to champion augmented reality headsets, with Nadella stating in 2019 that “mixed reality is one of the defining technologies of our time” and listing mixed reality as one of three technologies that will shape the future (along with AI and quantum computing).

Microsoft has been working on its AR headset for nearly a decade and launched the first developer edition in 2016. While the technology was praised for its innovative approach to overlaying digital objects onto a user’s view of the real world, it was clear that Microsoft has a long way to go to create the headsets you see in futuristic movies and shows. When we went hands-on with the HoloLens 2 a few years later, it felt like the company had taken only small steps forward.

Despite slow progress, Microsoft has doubled down on augmented and virtual reality in recent months, claiming its $US68.7 ($95) billion acquisition of Activision Blizzard will provide the “building blocks for the metaverse.”

Microsoft’s mixed-reality plans now appear to be hanging by a thread, and its most ambitious project yet is on the brink of collapse, just as talk about the metaverse — the future it was meant to help create — reaches a fever pitch.

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