Ciena - CIENA Reports Fourth Quarter Revenue of $367.8 Million, Adjusted Net Income of $0.05 per Diluted Share

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CIENA Reports Fourth Quarter Revenue of $367.8 Million, Adjusted Net Income of $0.05 per Diluted Share

Fiscal 2001 Revenue Increases 87% Over Fiscal 2000, Adjusted Net Income for Fiscal 2001 Increases 94% Over Fiscal 2000

Linthicum, MD — 12/13/2001

Ciena Corporation (NASDAQ: CIEN) today reported revenue of $367.8 million for its fourth fiscal quarter ended October 31, 2001. These results represent an increase of more than 27 percent as compared to the same period a year ago when the Company reported revenue of $287.6 million.

Adjusted net income per diluted share for the fourth quarter, after excluding a goodwill impairment charge, restructuring costs, deferred stock compensation charges, payroll taxes on stock option exercises and amortization of intangibles and goodwill was $17.1 million, or $0.05, earnings per diluted share. Reported, or GAAP, net loss for the period was $1,802.3 million, or a loss of $5.51 per diluted share.¹

For the twelve months ended October 31, 2001, Ciena reported revenue of $1,603.2 million, an increase of 87 percent over revenue of $858.8 million for fiscal year 2000. For the fiscal year 2001, exclusive of a goodwill impairment charge, restructuring costs, deferred stock compensation charges, in-process research and development, provision for doubtful accounts, settlement of accrued contract obligations, payroll taxes on stock option exercises and amortization of intangibles and goodwill, Ciena's adjusted net income totaled $195.3 million, or $0.60, earnings per diluted share, an increase of 94 percent compared to fiscal year 2000 adjusted net income of $100.8 million, or $0.34, earnings per diluted share. Reported, or GAAP, net loss for fiscal year 2001 was $1,794.1 million, or a loss of $5.75 per diluted share.¹

"Given the difficult telecom environment, we are very pleased with Ciena's performance in 2001," said Gary Smith, Ciena's president and CEO. "We believe our financial results - growth of 87 percent in revenue and 94 percent in adjusted net income - point to Ciena's strength and market leadership."

Ciena continues to diversify its customer base, adding five new customers in its fiscal fourth quarter, including AFN and eAccess, as well as a previously unannounced MultiWave Metro™ customer, Teleglobe.

Business Outlook

"The telecom industry is facing a dynamic and challenging market environment, the uncertainty of which has only been accentuated by the larger, overall economic slowdown," said Ciena's Smith. "We believe that the combination of Ciena's market-leading position, our compelling value proposition to carriers, our diverse and growing customer base, and our strong financial position enables us to make operating decisions differently than many of our competitors - we can play to win, not just to survive."

"Ciena intends to use the current market uncertainty to our advantage by pursuing a strategy of sustained investment in our business," said Smith. "Where others in the industry have elected to cut dramatically in attempts to preserve cash and merely survive the market downturn, we can continue to invest in strategic areas such as research and development and sales. We believe through sustained investment, particularly in these critical areas, we can extend our technology leadership and expand our market presence, firmly establishing ourselves as a winner when the market recovers."

"Short-term, given the uncertainty in the market and the resulting unpredictability of quarterly revenues, our sustained investment strategy means that we will incur operating losses," concluded Smith. "Ciena has consistently operated with an eye toward the future. We remain committed to running our business profitably long-term and we will constantly reassess the market to ensure our business strategies are aligned with dynamically changing market conditions."

Live Web Broadcast of Q4 and Fiscal Year 2001 Results

In conjunction with this announcement, Ciena will host a discussion of its fiscal fourth quarter and fiscal year 2001 results with investors and financial analysts on Thursday, December 13, 2001 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.

¹ Ciena provides adjusted net income and as adjusted net income per share data to assist investors in their analysis of our operating results. These adjustments are not in accordance with, or an alternative for, generally accepted accounting principles (GAAP) and may be different from the presentation of financial information provided by other companies. Adjusted net income and earnings per share as well as GAAP net income and earnings per share are presented in the consolidated statements of operations that accompany this press release.

(Condensed Consolidated Statements of Operations, Adjusted Consolidated Statement of Operations and Consolidated Balance Sheets follow)

Ciena CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
	Quarter Ended		Year Ended
	October 31, 2000	October 31, 2001	October 31, 2000	October 31, 2001

Revenue	$ 287,590	$ 367,774	$ 858,750	$ 1,603,229
Cost of goods sold	158,013	221,554	477,393	904,549
Gross profit	129,577	146,220	381,357	698,680

Operating expenses
Research and development (exclusive of $0,
$9,362, $0, $17,825 deferred stock compensation costs)	35,756	73,195	125,434	235,831
Sales and marketing (exclusive of $0, $917, $0,
$8,336 deferred stock compensation costs)	28,094	38,909	90,922	146,949
General and administrative (exclusive of $10, $6,122,
$40, $15,206 deferred stock compensation costs)	10,854	15,143	33,960	57,865
Settlement of accrued contract obligation	-	-	(8,538)	-
Deferred stock compensation costs	10	16,401	40	41,367
Amortization of goodwill	800	75,873	3,197	177,786
Amortization of intangible assets	109	1,922	438	4,413
In-process research and development	-	-	-	45,900
Restructuring costs	-	15,439	-	15,439
Goodwill impairment	-	1,719,426	-	1,719,426
Provision for doubtful accounts	19,222	-	28,010	(6,579)
Total operating expenses	94,845	1,956,308	273,463	2,438,397
Income (loss) from operations	34,732	(1,810,088)	107,894	(1,739,717)
Interest and other income, net	3,517	18,756	13,020	63,579
Interest expense	(81)	(12,098)	(340)	(30,591)
Income (loss) before income taxes	38,168	(1,803,430)	120,574	(1,706,729)
Provision (benefit) for income tax	12,405	(1,148)	39,187	87,333
Net income (loss)	$ 25,763	$ (1,802,282)	$ 81,387	$ (1,794,062)

Basic net income (loss) per common share	$ 0.09	$ (5.51)	$ 0.29	$ (5.75)

Diluted net income (loss) per common share
and dilutive potential common share	$ 0.09	$ (5.51)	$ 0.27	$ (5.75)

Weighted average basic common shares
outstanding	285,177	326,834	281,621	311,815

Weighted average basic common and
dilutive potential common shares
outstanding	301,582	326,834	299,662	311,815

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Ciena CORPORATION<
ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

	Quarter Ended		Year Ended
	October 31, 2000	October 31, 2001	October 31, 2000	October 31, 2001

Revenue	$ 287,590	$ 367,774	$ 858,750	$ 1,603,229
Cost of goods sold	158,013	221,554	477,393	904,549
Gross profit	129,577	146,220	381,357	698,680

Operating expenses (1):
Research and development	35,118	73,167	124,155	234,927
Sales and marketing	26,406	38,903	88,691	146,659
General and administrative	9,407	15,103	31,803	56,459
Total operating expenses	70,931	127,173	244,649	438,045
Income from operations	58,646	19,047	136,708	260,635
Interest and other income, net	3,517	18,756	13,020	63,579
Interest expense	(81)	(12,098)	(340)	(30,591)
Income before income taxes	62,082	25,705	149,388	293,623
Provision for income tax	20,177	8,611	48,551	98,364
Adjusted net income	$ 41,905	$ 17,094	$ 100,837	$ 195,259

Basic adjusted net income per common share	$ 0.15	$ 0.05	$ 0.36	$ 0.63

Diluted adjusted net income per common share
and dilutive potential common share	$ 0.14	$ 0.05	$ 0.34	$ 0.60

Weighted average basic common shares
outstanding	285,177	326,834	281,621	311,815

Weighted average basic common and
and dilutive potential common shares
outstanding	301,582	334,717	299,662	324,670

(1) As adjusted is exclusive of the following
charges:
Payroll tax on stock options	$ 3,773	$ 74	$ 5,667	$ 2,600
Settlement of accrued contract obligations	-	-	(8,538)	-
Deferred stock compensation costs	10	16,401	40	41,367
Amortization of goodwill	800	75,873	3,197	177,786
Amortization of intangible asset	109	1,922	438	4,413
In-process research and development	-	-	-	45,900
Restructure costs	-	15,439	-	15,439
Goodwill impairment	-	1,719,426	-	1,719,426
Provision for doubtful accounts	19,222	-	28,010	(6,579)
Income tax effect	(7,772)	(9,759)	(9,364)	(11,031)
Net effect on adjusted net income	$ 16,142	$ 1,819,376	$ 19,450	$ 1,989,321

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Ciena CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
			October 31,
			2000	2001

ASSETS
Current assets:
	Cash and cash equivalents…………..……………….……………………...		$ 143,187	$ 397,890
	Short-term investments……………………………………………………….		95,131	902,594
	Accounts receivable (net of allowance of $29,581 and $1,491)………….….		248,950	395,063
	Inventories, net……………………………………………………………….		141,279	254,968
	Deferred income taxes……………………………………………………..…		143,029	186,861
	Prepaid expenses and other…………………….………………………..…...		41,438	53,713
		Total current assets…………………………………………………………	813,014	2,191,089
Long-term investments………………………………………………………….			-	494,657
Equipment, furniture and fixtures, net……………………………………….…			189,231	331,490
Goodwill and workforce, net…………………………………………………...			4,461	178,891
Other intangible assets, net……………………………………………………..			4,588	47,874
Other assets…………………………………………………………………..…			15,907	73,300
Total assets…………………………………………………………………..			$ 1,027,201		$ 3,317,301

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
	Accounts payable…………………………………………………………….		$ 70,250	$ 68,735
	Accrued liabilities………………………………………………………….…		84,163	148,523
	Income taxes payable………………………………………………..……….		7,483	6,649
	Deferred revenue…………………………………………………….……….		10,731	29,480
	Other current obligations…………………………………………………….		712	995
		Total current liabilities…………………………………………………….	173,339	254,382
	Deferred income taxes……………………………………………………....		39,145	64,072
	Other long-term obligations…………………………………………………		4,882	5,982
	Convertible notes payable…………………………………………………..		-	863,883
		Total liabilities………………………………………….…………………	217,366	1,188,319
Commitments and contingencies
Stockholders' equity:
	Preferred stock - par value $0.01; 20,000,000 shares authorized; zero shares
	issued and outstanding……………………………………………………..		-	-
	Common stock - par value $0.01; 460,000,000 and 980,000,000 shares
	authorized; 286,530,631 and 328,022,264 shares issued and outstanding..		2,865	3,280
	Additional paid-in capital………………………………………………….…		557,257	3,667,512
	Notes receivable from stockholders………………………………………….		(30)	(3,236)
	Accumulated other comprehensive income……...……………………..….…		(903)	4,842
	Retained earnings (deficit)…………………...…………………………..…..		250,646	(1,543,416)
		Total stockholders' equity………………………...………………………..	809,835	2,128,982
	Total liabilities and stockholders' equity…………………..…...….……..….		$ 1,027,201	$ 3,317,301

About Ciena

Ciena specializes in network transition. We provide the flexible platforms, intelligent software and professional services to build converged networks for enhanced services and applications. With a growing global presence, Ciena leverages its heritage of practical innovation to deliver maximum performance and economic value in communications networks worldwide. For more information, visit www.ciena.com.

Note to Investors
This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions of Ciena (the Company) that involve risks and uncertainties. Forward-looking statements in this release, including that the telecom industry is facing a dynamic and challenging market environment, the uncertainty of which has only been accentuated by the larger, overall economic slowdown, that we believe the combination of Ciena's market-leading position, our compelling value proposition to carriers, our diverse and growing customer base, and our strong financial position enables us to make operating decisions differently than many of our competitors, that we can play to win, not just to survive, that Ciena intends to use the current market uncertainty to our advantage by pursuing a strategy of sustained investment in our business, that where others in the industry have elected to cut dramatically in attempts to preserve cash and merely survive the market downturn, we can continue to invest in strategic areas such as research and development and sales, that we believe through sustained investment, particularly in these critical areas, we can extend our technology leadership and expand our market presence, firmly establishing ourselves as a winner when the market recovers, that short-term, given the uncertainty in the market and the resulting unpredictability of quarterly revenues, our sustained investment strategy means that we will incur operating losses, that Ciena has consistently operated with an eye toward the future, that we remain committed to running our business profitably long-term and we will constantly reassess the market to ensure our business strategies are aligned with dynamically changing market conditions, are based on information available to the Company as of the date hereof. The Company's actual results could differ materially from those stated or implied in such forward-looking statements, due to risks and uncertainties associated with the Company's business, which include the risk factors disclosed in the Company's Report on Form 10-K filed with the Securities and Exchange Commission on December 13, 2001. Forward-looking statements include statements regarding the Company'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. The Company assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise.

Press Contacts:
Nicole Anderson
Ciena Corporation
(877) 857 -7377
pr@ciena.com

Investor Contacts:
Marie Downing
Ciena Corporation
(888) 243-6223
ir@ciena.com