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CIENA Reports First Quarter Revenue of $134.3 Million, Earnings Per Share of $0.37

Completes Alta Acquisition, Issues Guidance Toward Second Quarter and Fiscal Year 1998 Expectations

Ciena Corporation (NASDAQ: CIEN), today reported revenue of $134.3 million for its first fiscal quarter ended January 31, 1998. This compares with $53.9 million in revenue reported for the first fiscal quarter of 1997 and $121 million for the previous quarter ended October 31, 1997.

Net income for the quarter increased to $39.8 million, or $0.37 per share, compared with net income of $13.1 million, or $0.13 per share, for the same period in 1996 and $37.3 million, or $0.35 per share, for the fiscal fourth quarter 1997.

All earnings per share amounts represent diluted earnings per share as defined within Statement of Financial Accounting Standards No. 128 (SFAS 128).

"We are particularly pleased with the quarter's results given the fact that we are currently in the process of transitioning from being a single product manufacturer to a Company with a broader product family," said Patrick Nettles, Ciena's president and chief executive officer. "It takes more than research and development to actually build and deliver industry-leading DWDM products; it requires engineering for manufacturability and an organization that is absolutely committed to delivering on its promises to its customers. Ciena has proven that we can do just that."

Demonstrating its ability to deliver, Ciena expects to begin commercial shipments of its 40-channel, 100 gigabit per second capacity MultiWave® 4000 during the second fiscal quarter as scheduled. Ciena will be demonstrating the MultiWave 4000 system, running 40 channels at 50 GHz spacing, at booth #515 at the upcoming OFC trade show in San Jose, February 24 to 26, 1998.)

Commenting about the Company's income statement for the quarter, Joseph Chinnici, Ciena's senior vice president, finance and chief financial officer said, "As expected, Ciena's operating expenses continue to increase, both in real dollars and as a percentage of total revenue. We believe that investors should view this growth as evidence of our commitment to building our infrastructure and growing our R&D effort: critical steps toward sustaining the long-term potential of the Company."

The Company also disclosed that it has recently received a material update from WorldCom. Earlier in the week, WorldCom apprised Ciena of a change in its deployment policy which will result in a substantial reduction in system requirements from Ciena during fiscal 1998 as compared to the prior year. According to information shared with Ciena earlier this week, WorldCom purchased equipment during 1997 based on a policy designed to meet an estimated two years' worth of anticipated network capacity requirements. WorldCom's new policy calls for purchasing activity and bandwidth deployment to transition to more closely coincide with just-in-time bandwidth deployment, which, according to WorldCom, means significant purchasing from Ciena may resume in the latter part of calendar 1998.

"Ciena has been and remains our DWDM supplier of choice," said John Sidgmore, WorldCom's vice chairman and chief operating officer. "During 1997, Ciena delivered more capacity and at a faster rate than we frankly thought was possible. As a result, our long-distance capacity deployment is ahead of schedule."

"While there may be a short-term slowdown in WorldCom's order rate to Ciena, WorldCom has not changed its commitment to being the bandwidth leader and intends to continue to aggressively provision the capacity afforded by Ciena's DWDM systems throughout our growing network," concluded Sidgmore.

With respect to its relationship with AT&T, Ciena reported that it has made important progress in AT&T's testing and evaluation process, although volume, duration and timing of any purchases which might ensue from AT&T remain unpredictable.

The Company also announced it completed its acquisition of ATI Telecom International, Ltd. (Alta), a provider of telecommunications engineering, furnishing and installation services.

"We continue to believe we have the best product at the best price for AT&T and we are confident the testing and evaluation process is confirming this view," stated Patrick Nettles. "We remain optimistic about the revenue potential of this relationship for fiscal 1998 and beyond and will continue to focus our efforts on obtaining the majority share of the total opportunity. The addition of Alta provides Ciena with the installation experience and extensive field support capability required to assist a customer like AT&T with expeditious equipment deployment."

The Company issued the following guidance regarding its fiscal second quarter and the remainder of fiscal year 1998:

"In the past, we have cautioned investors about the potential for fluctuations in quarterly results as a result of our highly concentrated customer base," said Nettles. "The uncertainty resulting from the recent news from WorldCom combined with our planned continued re-investment in the business is likely to result in sequentially lower net income for the second quarter."

"As it is still early on in the quarter, it is difficult to assess the impact the WorldCom news will have on our top-line," continued Nettles. "We intend to move aggressively to offset the majority of the revenue shortfall from WorldCom, both in the second quarter and for the remainder of fiscal 1998, with additional revenue from existing and potential customers. However, at present, it appears likely that revenue in the second quarter of fiscal 1998 will be sequentially flat or possibly lower than that reported in the first quarter," said Nettles.

"There is no doubt we have our work cut out for us, but it is very early in the year, and based on the significant increase in proposal activity we're experiencing in the U.S. and internationally, market demand for DWDM systems appears to us to be accelerating," concluded Nettles. "I am very optimistic we have a realistic opportunity to achieve the consensus revenue expectations for fiscal 1998, which at approximately $600 million, would represent a solid achievement in year-to-year growth. More importantly, over the long-term, our product line expansion and diversification will lead to a broader customer base and a stronger, more robust revenue stream."

Ciena Corporation-CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data) (unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS
Percentage of Revenue Analysis (unaudited)

1 Comparison includes a $5 million dollar charge taken in Q1 1997 due to an
accrual of estimated legal and related costs associated with pending litigation