Microsoft regains its edge with hologram headset

The future depicted in Hollywood movies may have finally arrived.

Microsoft unveiled an augmented reality headset at an event at its Redmond, WA headquarters on Wednesday that projects holograms onto the real world, in a move that analysts said has given the U.S. technology giant its competitive edge.

A video demonstration of the HoloLens shows people playing Minecraft in their living room or talking to a friend through Skype with the holographic image appearing in front of them.

Microsoft

HoloLens and Microsoft Holographic – the computer system that the headset runs on – was unveiled as part of the launch of Windows 10 on Wednesday, the Redmond, WA-based company's latest operating system.

"Our industry's progress is punctuated by moments of category creation. Windows 10 and holographic computing is one such moment," Microsoft CEO Satya Nadella, said at the launch.

HoloLens does not require a connection to a PC and is wireless. Users can see through the dark lenses and use their hands to interact with the projected hologram. Microsoft billed the device as both a consumer and business product, showing how it could be used by games as well as designers to create three dimensional renders of a potential product.

'Innovation' back

Analysts marked the release of the HoloLens as the moment Windows returned to being at the forefront of technology.

"Microsoft was clearly repositioning itself as a company that wanted to be known for innovation," Ian Fogg, head of mobile at IHS, told CNBC by phone.

The virtual reality and augmented reality market is still in its early stages, but, with the new product, Microsoft is hoping to gain a strong foothold in the market. Its direct competitor is the Oculus VR – the company behind the Oculus Rift headset – which Facebook bought for $2 billion last year.

"Unlike other augmented reality experiences like Oculus which is focused primarily on gaming, Microsoft is positioning HoloLens as a multipurpose computer," Fogg added.

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Microsoft said it had worked with NASA to create a hologram image of Mars using the pictures from the Mars Rover, allowing them to explore the surface in close detail.

Windows 10 critical for Nadella
Windows 10 critical for Nadella   

Last week, Google axed its current version of Glass and said it would reorganize the business behind it, casting doubt of the future of smart eyewear. But Microsoft has shown its faith in the device category.

Analysts said that getting developers on board the platform will be key for the success of HoloLens.

"The true innovation it delivers will be determined by developer commitment in the months and years to come," Geoff Blaber vice president for Americas research at CCS Insight, said in a note.

'Lean and mean' company

Nadella took over the reins at Microsoft nearly a year ago and has since helped keep the technology giant relevant through its focus on cloud computing. Windows 10 continues Nadella's vision as it looks to shake off the negativity that surrounded its predecessor, Windows 8.

A new browser as well as Microsoft's answer to Apple's Siri known as Cortana has been introduced on the operating system which will be used across mobiles, tablets, PCs and the Xbox One games console.

Microsoft's share price is up 26 percent over the year and analysts are positive about the company's future.

"Microsoft remains well-positioned and laser-focused in strong secular growth areas (e.g., cloud) while recent restructuring efforts should make it a 'leaner and meaner' technology giant over the coming years," Daniel Ives, managing director of technology research at FBR Capital Markets, said in a note.