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CIENA Reports Fourth Quarter and Fiscal Year 2003 Results

Ciena® Corporation (NASDAQ:CIEN - News), a leading global provider of innovative networking solutions, today reported its fourth quarter results for the period ending October 31, 2003. Revenue for the quarter totaled $70.6 million, a 3% sequential increase and an increase of 14% from same period a year ago. On a generally accepted accounting principles (GAAP) basis, Ciena's reported net loss for the quarter was $115.0 million, or a net loss of $0.24 per share.

Revenue for the fiscal year ending October 31, 2003 totaled $283.1 million, a 22% decrease from fiscal 2002. On a GAAP basis, Ciena's net loss for the fiscal year was $386.5 million, or a net loss of $0.87 per share, compared to the previous year's GAAP net loss of $1.6 billion, or $4.37 per share.

"Ciena continues to make strides toward sustained profitability," said Gary Smith, Ciena's president and chief executive officer. "Since the fourth quarter of last year we have worked to enable growth by entering four new markets and by adding nine new products to our solutions portfolio as a result of both acquisitions and strategic partnerships. During that same time, we have improved gross margins 17 points and reduced our ongoing operating expenses by 25%.

"Key to the success of Ciena's strategy of continued investment is establishing the foundation for future revenue growth," said Smith. "Overall, we believe we have made solid progress, and we are encouraged by what seems to be a greater level of stability in the telecom industry."

Non-GAAP Presentation

In evaluating the operating performance of its business, Ciena's management excludes certain charges or credits that are required by GAAP. These items, which are identified in the table below, 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 the Company's control.

These adjustments are not in accordance with GAAP, and making these adjustments may not permit meaningful comparisons to other companies. As of the quarter ended October 31, 2003, Ciena's weighted average shares outstanding were approximately 470,244,000. Adjusting Ciena's quarterly GAAP results as noted would reduce the Company's net loss in its fourth fiscal quarter to $0.08 per share.

As of the fiscal year ended October 31, 2003, Ciena's weighted average shares outstanding were approximately 446,696,000. Adjusting Ciena's twelve-month GAAP results as noted would reduce the Company's net loss for the period to $0.38 per share.

Fourth Quarter 2003 Performance Highlights

• Recognized revenue from 99 customers.
• Completed the acquisition of Akara Corporation, recognizing initial revenue from Akara's CN platform in the quarter and adding 16 new CN customers.
• Added six additional (non CN) first-time, revenue-generating customers in the quarter.
• Ended the quarter with cash and short- and long-term investments valued at $1.63 billion, using cash of $123 million in the quarter.
• Delivered lower-than-expected research and development, sales and marketing, and general and administrative operating expenses, despite the addition of a full quarter of WaveSmith-related expenses and the addition of Akara-related expenses.

Fourth Quarter 2003 Solution and Strategic Highlights

• Entered the extended SONET/SDH-based storage area networking (SAN) market with the acquisition of Akara.
• Integrated Ethernet multiplexing into ONLINE Edge.
• Entered the service edge router market with a worldwide reseller agreement with Laurel Networks.
• Entered the multiservice transport market with a worldwide reseller agreement with Luminous Networks.
• Reduced the cost of delivering storage extension services by introducing ESCON enhancements to the ONLINE Edge platform.
• Gained 'RUS Acceptance' from USDA's Rural Utilities Service on Ciena's metro networking solutions.

Business Outlook

"In the last year, we have substantially increased Ciena's addressable market and we believe, our future revenue and earnings potential, by entering new markets where we anticipate growth, predominantly as a result of the demand for a converged, all-service network," said Smith. "Going forward, we will look for additional opportunities to further expand our solution portfolio and to increase our addressable market through both additional partnerships and acquisitions.

"We expect that revenue in our first fiscal quarter will be flat to up as much as ten percent from our fiscal fourth quarter revenue, though as always, these expectations include some risk. We are growing increasingly confident about our position with a number of incumbent carriers and believe that the combination of new wins, our broader solutions offering and our expanding customer base will fuel meaningful revenue growth in fiscal 2004," concluded Smith.

Live Web Broadcast of Q4 and Fiscal Year Results Conference Call

Ciena will host a discussion of its fourth quarter and fiscal 2003 results with investors and financial analysts today, Thursday, December 11, 2003 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: www.Ciena.com/investors.

(Consolidated Statements of Operations and Consolidated Balance Sheets follow)

The adjustments management makes in analyzing Ciena's fourth quarter and fiscal 2003 GAAP results are as follows:

• Deferred stock compensation costs - a non-cash expense largely unrelated to normal operations, and which arises under GAAP accounting from the assumption of unvested stock options issued by any companies we acquire, including Cyras, ONI and WaveSmith.
• Amortization of intangible assets - a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology acquired in the Cyras, ONI, WaveSmith and Akara acquisitions which Ciena is required to amortize over its expected useful life.
• In-process research and development - a non-recurring expense related to acquired technology.
• Restructuring costs - non-recurring charges, unrelated to normal operations, incurred as the result of reducing the size of the Company's operations to align its resources with the reduced size of the telecommunications market as well as the result of targeting new segment opportunities within the overall market.
• Goodwill and intangible impairment - a non-cash expense unrelated to normal operations.
• Loss on equity investments, net - a decline in the fair market value of an equity investment that is determined to be other-than-temporary.
• Loss on extinguishment of debt - a non-recurring expense, unrelated to normal operations.
• Nortel litigation - a non-recurring expense, unrelated to normal operations incurred in the first quarter fiscal 2003 and included in general and administrative expense for fiscal 2003.
• Income tax benefit on adjusted net loss - the income tax charge or benefit on the adjusted net loss, which is a necessary adjustment for consistency. The Company currently has a full valuation allowance for GAAP reporting purposes and accordingly does not recognize a tax benefit for losses generated.