Three and a half years after revealing its HoloLens mixed-reality headset, Microsoft Corp. could unveil its successor as soon as the first quarter of next year, according to a new report.

Brad Sams at Thurott.com claims to have seen internal papers that indicate that the next version of the headset, codenamed “Sydney,” is scheduled for release next year.

It will be “lighter, more comfortable to wear and have significantly improved holographic displays,” he said, and will “cost significantly less than the current version of the HoloLens.”

There have been a number of reports over the last year on what Microsoft has planned for the new version. In July 2017, Marc Pollefeys, director of science of the company’s mixed-reality group, said the next iteration of the headset will pack a coprocessor for running artificial intelligence software. The chip is claimed to be a custom design that lets the system harness AI for tasks that are currently handled less efficiently because of hardware limitations.

Sams noted that the new headset will likely be released as a developer preview prior to a public launch, since the original Hololens wasn’t released initially released to the public. Microsoft apparently is approaching mixed reality and virtual reality as a “must-win market.”

“This is likely because they are on the sidelines of the smartphone segment and missing out on this generation of devices would inflict serious long-term ramifications for the company about being anything more than a cloud company,” he said.

Which market Microsoft is aiming for, though, is another question. Although there are games for the HoloLens, the company thus far has primarily focused on industrial uses for the headset, including the release of two new apps for industrial purposes only last month.

When people think of headsets, Facebook Inc.’s Oculus Rift and HTC Corp.’s Vive, along with various headsets for Android phones, come to mind more readily than Microsoft’s HoloLens. Microsoft may wish to own the market for business-oriented mixed-reality headsets much in the same way that its Windows and its Office products do.

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