News

Ciena Reports Fiscal Third Quarter 2008 Results

LINTHICUM, Md.-(Business Wire)-September 4, 2008 - Ciena^® Corporation (NASDAQ:CIEN), the network specialist, today announced results for its fiscal third quarter ended July 31, 2008. Revenue for the third quarter totaled $253.2 million, representing a 5% sequential increase from fiscal second quarter 2008 revenue of $242.2 million, and an increase of 24% over the same period a year ago when Ciena reported revenue of $205 million. For the nine months ended July 31, 2008, Ciena reported revenue of $722.8 million, representing an increase of 28% over revenue of $563.6 million for the same nine-month period in fiscal 2007.

On the basis of generally accepted accounting principles (GAAP), Ciena’s net income for the fiscal third quarter 2008 was $11.7 million, or $0.12 per diluted common share. This compares to fiscal second quarter GAAP net income of $23.8 million, or $0.23 per diluted common share, and a reported GAAP net income of $28.3 million, or $0.29 per diluted share, for the same period a year ago. For the nine months ended July 31, 2008, Ciena’s reported GAAP net income was $64.3 million, or $0.63 per diluted common share. This compares to a GAAP net income of $52.4 million, or $0.57 per diluted common share, for the same period in fiscal 2007.

Ciena’s adjusted (non-GAAP) net income for the fiscal third quarter 2008 was $39.8 million, or $0.37 per diluted common share. This compares to fiscal second quarter adjusted (non-GAAP) net income of $42.3 million, or $0.40 per diluted common share, and adjusted (non-GAAP) net income of $40.0 million or $0.41 per diluted common share in the fiscal third quarter 2007. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is provided in the table in Appendix A.

“Our fiscal third quarter performance was solid,” said Gary Smith, Ciena’s president and CEO. “We delivered our eighteenth quarter of sequential revenue growth, gross and operating margins in-line with our targets, and improvement across several key balance sheet metrics.”

Third Quarter 2008 Performance Highlights

Achieved sequential quarterly revenue growth of 5% and year-over-year revenue growth of 24%.
Drove 38% revenue contribution from non-U.S. customers.
Attained overall GAAP gross margin of 49.6% with product gross margin of 52% and services gross margin of 34%. Exclusive of a $4.3 million fair value adjustment of acquired inventory, amortization of intangible assets and share-based compensation, adjusted (non-GAAP) gross margin was 52%.
Delivered GAAP income from operations of 6% of revenue and adjusted (non-GAAP) income from operations of 15% of revenue.
Generated $33.7 million cash from operations.
Ended the quarter with cash, cash equivalents and short- and long-term investments of $1.1 billion.

Third Quarter 2008 Customer and Product Highlights

Sprint, Cisco and Ciena announced implementation of 40-gigabits-per-second (Gbps) network capabilities on the Global Sprint Tier 1 IP Network using Ciena’s CoreStream^® Agility Optical Transport System.
Ciena’s G10 and G10X Ethernet Service Modules received 4 out of 5 diamonds in Broadband Gear Report’s 2008 Diamond Technology Reviews.
VTR Global Com S.A. deployed the CN 4200^®RS FlexSelect^™ Advanced Services Platform with ROADM functionality, throughout its Santiago, Chile network to enhance the delivery of its triple play offering.
American Fiber Systems selected Ciena’s CN 4200 Advanced Services Platform Family, for deployment across multiple networks in Atlanta, Alpharetta and Marietta.
Mzima Networks implemented Ciena’s CN 5060^™ Multiservice Carrier Ethernet Platform across its networks in North America and Europe.
Telx deployed Ciena’s CN 4200 FlexSelect Advanced Services Platform in Dallas and New York as part of its Metro Cross Connect service to facilitate interconnections between dual ColoXchange facilities within a city.
Ciena’s CN 4200 FlexSelect Advanced Services Platform was integrated into EMC^® Smarts^®Service Assurance Manager offering enterprise customer’s end-to-end infrastructure visibility and providing efficient and cost-effective network services management.
Ciena’s CN 4200 FlexSelect Advanced Services Platform, CoreDirector^® Multiservice Optical Switch and CoreStream Agility Optical Transport System passed Joint Interoperability Test Command testing for optical standards and interoperability in Department of Defense networks.

Business Outlook

“In addition to existing customer-specific challenges, we have recently begun to experience order delays from many of our Tier One service provider customers, which we attribute to their guarded approach to capital expenditures given the uncertain macroeconomic environment,” said Smith. “While we’ve seen no project or order cancellations, sales cycles are lengthening and some deployments are slowing. As a result, we now expect fiscal fourth quarter revenue in a range of $190 to $210 million.”

“While current economic conditions warrant a cautious near-term outlook, the fundamental drivers of our business – growing capacity demands and the transition to more efficient, more powerful, automated networks – remain sound. We are confident that our portfolio and value propositions are differentiated, positioning us to take advantage of what is predicted to be a longer-term investment cycle in the transition from SONET/SDH to Ethernet-based networks,” said Smith.

Live Web Broadcast of Fiscal Third Quarter Results

Ciena will host a discussion of its fiscal third quarter results with investors and financial analysts today, Thursday, September 4, 2008 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via Ciena’s homepage at www.ciena.com. An archived version of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena’s website at: http://www.ciena.com/investors.

Note to Investors

Forward-looking statements. This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof; and Ciena’s actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Report on Form 10-Q filed with the Securities and Exchange Commission on June 6, 2008. Forward-looking statements include statements regarding Ciena’s expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and “would” or similar words. Forward-looking statements in this release include: while we’ve seen no project or order cancellations, sales cycles are lengthening and some deployments are slowing; as a result, we now expect fiscal fourth quarter revenue in a range of $190 to $210 million; while current economic conditions warrant a cautious near-term outlook, the fundamental drivers of our business – growing capacity demands and the transition to the more efficient, more powerful, automated networks – remain sound; and we are confident that our portfolio and value propositions are differentiated, positioning us to take advantage of what is predicted to be a longer-term investment cycle in the transition from SONET/SDH to Ethernet-based networks. Ciena assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise.

Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of Ciena’s gross profit, operating expense, income from operations and net income. In evaluating the operating performance of Ciena’s business, management excludes certain charges and credits that are required by GAAP. These items, share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena’s control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena’s GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena’s non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena’s results of operations in conjunction with our corresponding GAAP results. For a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release, see Appendix A.

About Ciena

Ciena specializes in the transition to service-driven networks. We provide flexible platforms, intelligent software and professional services to help our customers use their networks to fundamentally change the way they compete. With a growing global presence, Ciena leverages its heritage of practical innovation to deliver maximum performance and economic value in communications networks worldwide. We routinely post recent news, financial results and other important announcements and information about Ciena on our website at www.ciena.com.

EMC and Smarts are registered trademarks of EMC Corporation.


CIENA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

	Quarter Ended July 31,						Nine Months Ended July 31,
	2007			2008			2007			2008
Revenues:
Products	$	182,143		$	223,661		$	501,637		$	641,632
Services		22,808			29,518			61,942			81,162
Total revenue		204,951			253,179			563,579			722,794

Costs:
Products		84,383			107,953			250,681			295,381
Services		22,903			19,595			59,775			57,617
Total cost of goods sold		107,286			127,548			310,456			352,998
Gross profit		97,665			125,631			253,123			369,796
Operating expense:
Research and development		31,671			47,809			93,166			127,881
Selling and marketing		30,303			39,440			85,360			111,639
General and administrative		14,564			14,758			36,562			54,036
Amortization of intangible assets		6,295			8,671			18,885			23,901
Restructuring recoveries		(1,196	)		-			(2,396	)		-
Total operating expense		81,637			110,678			231,577			317,457
Income from operations		16,028			14,953			21,546			52,339
Interest and other income, net		19,464			5,342			51,206			32,911
Interest expense		(6,931	)		(1,855	)		(19,227	)		(11,074	)
Gain on equity investments, net		592			-			592			-
Realized loss on marketable debt investments		-			(5,114	)		-			(5,114	)
Income before income taxes		29,153			13,326			54,117			69,062
Provision for income taxes		841			1,603			1,739			4,772
Net income	$	28,312		$	11,723		$	52,378		$	64,290
Basic net income per common share	$	0.33		$	0.13		$	0.61		$	0.72
Diluted net income per potential common share	$	0.29		$	0.12		$	0.57		$	0.63
Weighted average basic common shares outstanding		85,651			90,216			85,268			88,871
Weighted average dilutive potential common shares outstanding		101,568			111,681			96,189			110,654