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CIENA Reports Second Quarter Revenue of $142.7 Million, EPS of $0.29 Excluding One-Time Charges and Additional Expense Accruals

Ciena Corporation (NASDAQ: CIEN), today reported revenue of $142.7 million for the second fiscal quarter ended May 2, 1998. This compares with $97.6 million in revenue reported for the second fiscal quarter of 1997.1

Net income for the quarter was $31.0 million, or $0.29 per share, excluding one-time charges associated with the acquisition of Terabit Technologies, Inc. and additional expense accruals pertaining to the Company's on-going litigation with Pirelli. Net income for the year-ago quarter was $28.5 million, or $0.27 per share.1

The Company also disclosed that it has recently entered into discussions with Pirelli in an attempt to resolve matters surrounding the companies' pending litigation. While there can be no assurances made that an agreement will be reached, it is believed that both companies are approaching the discussions in good faith and with the intent to resolve all pending litigation.2

For the six months ended May 2, 1998, Ciena reported revenue of $287.8 million, compared with $161.3 million for the first half of 1997. Net income for the first six months of 1998 totaled $70.7 million, or $0.66 per share, as compared with $45.4 million, or $0.44 per share for the same period in 1997, once again, excluding the effect of one-time charges for purchased research and development in 1998 and additional expense accruals pertaining to the Company's on-going litigation with Pirelli in both 1997 and 1998.1

Net income and earnings per share amounts reported in the attached consolidated statement of operations are inclusive of the effects of one-time charges and litigation expenses. All earnings per share amounts represent diluted earnings per share as defined within Statement of Financial Accounting Standards No. 128 (SFAS 128).

"In the face of serious adversity and uncertainty, this quarter Ciena demonstrated exactly what's behind the Company's success: persistence and collaboration – old-fashioned teamwork!" said Patrick Nettles, Ciena's president and chief executive officer. "With the news of a change in a major customer's ordering pattern coming to us two weeks into the quarter, we knew we had an enormous challenge ahead of us. The fact that we were able to deliver shows what can be accomplished when an organization pulls together. More importantly, our ability to recover is clearly an indicator that the demand for bandwidth and Ciena's DWDM solutions is strong and growing."

Ciena announced several new customers during its second fiscal quarter, including Bell Atlantic, its first regional Bell operating company (RBOC) customer; GST Telecommunications, Inc., its first competitive local exchange carrier (CLEC) customer; and Hermes Europe Railtel, its fifth international customer and the first carrier to deploy Ciena's DWDM equipment on a pan-European network. The Company also received follow-on orders from Cable and Wireless Communications and Digital Teleport, Inc. (DTI) and announced a renewal and extension of its existing relationship with Sprint.

As planned, Ciena began commercial shipments of its 40-channel, 100 gigabit per second capacity MultiWave® 4000 during the second fiscal quarter, making its first shipments to Sprint and subsequent shipments to DTI.

"During the quarter, we continued to aggressively invest in critical research and development efforts and in our international sales and marketing infrastructure," said Joseph Chinnici, Ciena's senior vice president finance and chief financial officer. "While operating expenses may have come in a bit higher than expected, investors should view these results with an understanding that Ciena is investing for the future with the goal of delivering continued long-term shareholder value."

"The quarter was significant for us in many ways," said Ciena's Nettles. "Our strategic announcement with Cisco and the establishment of the Optical Internetworking Forum are critical first steps toward the proliferation of open, standard interfaces and the deployment of true next-generation optical internetworks. Ultimately, ubiquitous interoperability between the traditional data networking layer and the transport layer will enable service providers to build more scalable and cost-effective networks for data services."

The Company issued the following guidance regarding its fiscal third quarter and the remainder of fiscal year 1998: "We face continued uncertainty surrounding the volume and timing of the resumption of ordering from WorldCom and at this point, we still have little visibility as to the timing or volume of potential orders from AT&T," concluded Nettles. "However, based on account activity we've seen recently, both domestically and internationally, we believe we will be able to deliver moderately sequentially higher revenue and net income for the third quarter and we continue to believe that we have a realistic opportunity of achieving consensus revenue expectations for the year of approximately $600 million."

1 Past financial results have been restated to reflect the consolidated results of Alta Telecom, Inc., acquired by Ciena on February 19, 1998.

2 The additional expense accrual recorded this quarter represents management's estimate of the expenses necessary to carry the litigation through to resolution in the event that settlement is not reached.

(Consolidated Statements of Operations, Percentage of Revenue Analysis and Consolidated Balance Sheets follow)

Ciena Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
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CONSOLIDATED STATEMENTS OF OPERATIONS
Percentage of Revenue Analysis