March 21 (Reuters) - Microsoft ( MSFT ) has agreed to

pay Inflection about $650 million while hiring the AI startup's

staff, a person familiar with the matter told Reuters on

Thursday.

The transaction is mostly in the form of a licensing deal

that makes Inflection's models available for sale on Microsoft's ( MSFT )

Azure cloud service, the person with direct knowledge on the

deal said.

The software giant

hired

Inflection co-founders Mustafa Suleyman and Karen Simonyan,

along with several employees of the AI firm, for a newly created

consumer AI unit called Microsoft AI.

Inflection is using the licensing fee to provide some

investors, including Greylock and Dragoneer Investment Group, a

one-time and half times of return, the source added.

Microsoft ( MSFT ) and Inflection AI did not immediately respond

to Reuters' requests for comments.