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CIENA Reports Second Quarter Results

Ciena® Corporation (NASDAQ: CIEN) today reported revenue of $87.1 million for its second fiscal quarter ended April 30, 2002. Under GAAP, Ciena’s reported net loss for the period was $612.2 million, or a net loss of $1.86 per share.

In accordance with prior announcements, during the quarter, Ciena took a restructuring charge of approximately $121.4 million, associated with workforce reductions, lease terminations, non-cancelable lease costs and the write-down of certain property, equipment and leasehold improvements. During the quarter, the Company also recorded an income tax provision of $148.0 million. This provision consisted of an income tax benefit of $157.8 million on net loss for the quarter, offset by a $305.8 million non-cash charge to establish a valuation allowance against our gross deferred tax assets. In addition, and as was disclosed previously, Ciena recorded a charge of approximately $223.2 million, primarily related to excess inventory associated with its long-haul transport products and purchase commitments with suppliers. These charges are reflected in the Company’s reported net loss for the quarter.

“The restructuring efforts we made in February and in March dramatically reduced Ciena’s operating expenses and overhead costs, and we expect to see additional benefit of those actions in our financial results for our fiscal third quarter,” said Gary Smith, Ciena’s president and chief executive officer. “In the last several quarters, Ciena has taken steps to realign itself with a dramatically changed telecom environment. The unusually large inventory-related charge we’ve taken in this quarter was a necessary part of that realignment although it had a significant negative effect on the quarter’s results.”

Revenue from international customers increased sequentially from approximately 22% of total revenue in Ciena’s first fiscal quarter 2002 to approximately 43% of total revenue in its second fiscal quarter 2002, reflecting strong sequential growth from the Asia/Pacific region.

“Ciena’s strategy throughout this telecom industry downturn has been to take the steps needed to ensure we are well positioned, both financially and from a product offering standpoint, when our carrier customers resume more normal spending levels,” continued Smith. “We continue to believe that through a combination of execution, expense management and resource prioritization, we can manage through these difficult times for our industry and emerge as an even stronger competitor to traditional telecom equipment providers.”

Management also analyzes Ciena’s results by excluding 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.

*Please see appendix A for additional information about this table

The total per share effect of the items identified in the table on Ciena’s GAAP reported net loss was $1.23. This adjustment is not in accordance with GAAP and making such adjustment may not permit meaningful comparisons to other companies.

Business Outlook

Regarding the Company’s outlook, Smith said, “We’re optimistic that the telecom industry will soon see the worst of this downturn, but continued uncertainty surrounding service providers’ near-term spending and deployment plans makes it impossible to call a bottom with any certainty. At this point we expect that Ciena’s fiscal third quarter revenue, without taking into account any revenues from ONI after we complete the deal, will be flat to down from second quarter levels.”

Live Web Broadcast of Q2 Fiscal Year 2002 Results

In conjunction with this announcement, Ciena will host a discussion of its fiscal second quarter results with investors and financial analysts on Thursday, May 23, 2002 at 8:30 AM (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.

(Condensed Consolidated Statements of Operations and Consolidated Balance Sheets follow)

Ciena CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Ciena CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

Appendix A


The items excluded in management’s analysis of Ciena’s second quarter GAAP results are as follows:

• Payroll tax on stock options – an uncontrollable expense, largely unrelated to normal operations, that fluctuates significantly depending largely on the price of our stock and the magnitude of option exercises in a given period.
  
  
• 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.
  
  
• Amortization of intangible asset – a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology  acquired in the Cyras acquisition which Ciena is required to amortize over its expected useful life.
  
  
• Restructuring costs – non-recurring charges, unrelated to normal operations, incurred as a result of reducing the size of the Company’s operations to align its resources with the reduced size of the telecommunications market.
  
  
• Provision for doubtful accounts – non-recurring charges that are outside of the Company’s control that arise when our customers’ ability to pay is in doubt, in recent periods primarily related to the financial health of service provider customers.
  
  
• Gain (or loss) on equity investments, net – non-recurring income (or charges) not related to ongoing operations that arise from the fluctuation in value of investments in other companies.
  
  
• Income tax effect – the income tax charge or benefit of the foregoing items, which is a necessary adjustment for consistency.