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CIENA Reports Second Quarter Revenue of $425.4 Million, Adjusted Net Income of $0.20 per Diluted Share

Company Maintains 2001 Revenue Expectations of 95% to 105% Growth Over 2000; Nettles Moves to Executive Chairman, Smith Takes CEO Role

Linthicum, MD — 05/17/2001

Ciena Corporation (NASDAQ: CIEN) today reported revenue of $425.4 million for its second fiscal quarter ended April 30, 2001, including revenue from eight new customers. Ciena's second quarter sales represent sequential revenue growth of more than 20 percent over the Company's fiscal first quarter revenue of $352.0 million, and an increase of more than 129 percent as compared to the same period a year ago when the Company reported revenue of $185.7 million.

Adjusted net income for the second quarter, which excludes approximately $75.7 million in charges related to the acquisition of Cyras Systems, Inc., as well as payroll taxes on stock option exercises, and amortization of intangibles and goodwill, was $65.4 million or, $0.20, earnings per diluted share. This represents an increase of approximately 19 percent compared with adjusted net income for the previous quarter of $55.1 million or, $0.18, earnings per diluted share, exclusive of payroll tax on stock option exercises and amortization of intangibles and goodwill. Consolidated statements of operations showing net income inclusive of the aforementioned items have been included with this press release. Consensus of First Call estimates for Ciena's second quarter fiscal 2001 was $0.16 earnings per diluted share.

In addition to its quarterly results, the Company announced that effective immediately, current Chairman and Chief Executive Officer, Patrick Nettles would assume the role of Executive Chairman, focused on the long-term strategic direction of Ciena, while current President and Chief Operating Officer, Gary Smith, would become President and Chief Executive Officer.

"Ciena's business has demonstrated remarkable resilience throughout these last several quarters of tightening macro-economic conditions," said Ciena's Executive Chairman, Patrick Nettles. "While service providers have clearly become more cautious with where they spend scarce capex dollars, we believe Ciena's strength offers further evidence of a shift in carrier spending - from costly, hard-to-scale legacy networks to more capital efficient, operationally-effective intelligent next-generation optical networks."

Quarterly Highlights

Ciena continues to diversify its growing customer base, taking revenue from eight new customers in the second quarter, including initial revenues from recently announced customers Dynegy, Genuity, Level 3 and TyCom. The Company's total revenue-generating optical networking equipment customer base now totals 49, of which, 33 contributed to Ciena's revenues during the most recent quarter.

The second quarter also marked the second sequential quarter where sales of CoreDirector™, Ciena's industry-leading next-generation, intelligent optical core switch, surpassed ten percent of total revenue. CoreDirector CI™, the reduced-footprint version of CoreDirector was released for general availability in the quarter, as were enhanced SDH capabilities for both the CoreDirector and CoreDirector CI platforms.

During the quarter Ciena also completed its acquisition of Cyras Systems, Inc. with the Cyras organization forming Ciena's new Fremont, California-based Metropolitan Switching Division. In addition, Ciena's MetroDirector K2™, the metropolitan edge switching system developed by Cyras, is currently ready for shipment in limited quantities and Ciena has received initial customer commitments for the product.

"The integration of the Cyras team is proceeding well and we're very pleased with the early customer traction we've seen from the MetroDirector K2 platform," said Ciena's President and CEO, Gary Smith.

Business Outlook

Commenting on Ciena's business outlook Smith said: "Despite a challenging economic environment, we continue to believe that it is possible for Ciena to achieve 2001 revenue growth of between 95 to 105 percent over 2000. We also believe that it is possible to achieve 2001 adjusted EPS within the current consensus range of sell-side analyst estimates of $0.72 to $0.75, provided we continue to successfully execute and macro economic conditions do not change dramatically."

Live Web Broadcast of Q2 Results Discussion

In conjunction with this announcement, as previously announced, Ciena will host a discussion of its second fiscal quarter results with investors and financial analysts on Thursday, May 17, 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.

(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

Six Months Ended

 

April 30,

April 30,

April 30,

April 30,

 

2000

2001

2000

2001

Revenue

$ 185,679

$ 425,396

$ 337,892

$ 777,385

Cost of goods sold

104,205

231,509

191,208

423,346

Gross profit

81,474

193,887

146,684

354,039

Operating expenses:

       

Research and development (exclusive of $0, $1,672, $0, $1,672 deferred stock compensation costs)

29,056

54,344

57,890

96,848

Selling and marketing (exclusive of $0,$491, $0, $491 deferred stock compensation costs)

20,331

38,782

38,453

68,418

General and administrative (exclusive of $0, $572, $0, $572 deferred stock compensation costs)

7,176

16,787

14,047

27,932

Deferred stock compensation costs

-

2,735

-

2,735

Amortization of goodwill

799

25,373

1,598

26,271

Amortization of intangible assets

110

1,000

219

1,109

In-process research and development

-

45,900

-

45,900

Total operating expenses

57,472

184,921

112,207

269,213

Income from operations

24,002

8,966

34,477

84,826

Interest and other income (expense), net

3,357

20,707

6,403

25,003

Interest expense

(89)

(7,128)

(185)

(7,215)

Income before income taxes

27,270

22,545

40,695

102,614

Provision (benefit) for income taxes

8,863

73,225

13,226

100,048

Net income (loss)

$ 18,407

$ (50,680)

$ 27,469

$ 2,566

         

Basic net income (loss) per common share

$ 0.07

$ (0.17)

$ 0.10

$ 0.01

         

Diluted net income (loss) per common share

       

and dilutive potential common share

$ 0.06

$ (0.17)

$ 0.09

$ 0.01

Weighted average basic common shares

       

Outstanding

280,162

306,329

278,600

296,758

Weighted average basic common and

       

dilutive potential common shares

       

outstanding

299,126

306,329

297,954

310,164

(more)

Ciena CORPORATION

ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Quarter Ended

Six Months Ended

 

April 30,

April 30,

April 30,

April 30,

 

2000

2001

2000

2001

Revenue

$ 185,679

$ 425,396

$ 337,892

$ 777,385

Cost of goods sold

104,205

231,509

191,208

423,346

Gross profit

81,474

193,887

146,684

354,039

Operating expenses:

       

Research and development (1)

29,056

54,156

57,890

96,129

Selling and marketing (1)

20,331

38,682

38,453

68,171

General and administrative (1)

7,176

16,337

14,047

26,878

Total operating expenses (1)

56,563

109,175

110,390

191,178

Income from operations

24,911

84,712

36,294

162,861

Interest and other income (expense), net

3,357

20,707

6,403

25,003

Interest expense

(89)

(7,128)

(185)

(7,215)

Income before income taxes

28,179

98,291

42,512

180,649

Provision for income taxes

9,158

32,927

13,816

60,517

Net income

$ 19,021

$ 65,364

$ 28,696

$ 120,132

Basic net income per common share

$ 0.07

$ 0.21

$ 0.10

$ 0.40

Diluted net income per common share

       

and dilutive potential common share

$ 0.06

$ 0.20

$ 0.10

$ 0.39

Weighted average basic common shares

       

outstanding

280,162

306,329

278,600

296,758

Weighted average basic common and

       

dilutive potential common shares

       

outstanding

299,126

319,166

297,954

310,164

(1) As adjusted is exclusive of the following charges:

       

Payroll tax on stock options

$ -

$ 738

$ -

$ 2,020

Deferred stock compensation costs

-

2,735

-

2,735

Amortization of goodwill

799

25,373

1,598

26,271

Amortization of intangible assets

110

1,000

219

1,109

In-process research and development

-

45,900

-

45,900

Total

$ 909

$ 75,746

$ 1,817

$ 78,035

Net effect on adjusted net income

$ 614

$ 116,044

$ 1,227

$ 117,566

 

Ciena CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

October 31,

April 30,

2000

2001

ASSETS

Current assets:

Cash and cash equivalents

$ 143,187

$ 1,144,212

Short term investments

95,131

357,163

Accounts receivable, net

248,950

267,011

Inventories, net

141,279

276,020

Deferred income taxes

143,029

142,290

Prepaid expenses and other

41,438

57,035

Total current assets

813,014

2,243,731

Long term investments

-

336,073

Equipment, furniture and fixtures, net

189,231

286,413

Goodwill, net

4,461

2,036,579

Other intangible assets, net

4,588

62,778

Other long term assets

15,907

64,849

Total assets

$1,027,201

$5,030,423

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$ 70,250

$ 115,410

Accrued liabilities

84,163

128,668

Income taxes payable

7,483

7,231

Deferred revenue

10,731

18,149

Other current obligations

712

1,113

Total current liabilities

173,339

270,571

Deferred income taxes

39,145

39,554

Convertible notes and other long-term obligations

4,882

864,193

Total liabilities

217,366

1,174,318

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; 980,000,000 shares authorized;

286,530,631 and 326,454,240 shares issued and outstanding

2,865

3,265

Additional paid-in capital

557,257

3,703,524

Deferred stock compensation

-

(95,721)

Notes receivable from stockholders

(30)

(7,784)

Accumulated other comprehensive income (loss)

(903)

(391)

Retained earnings

250,646

253,212

Total stockholders' equity

809,835

3,856,105

Total liabilities and stockholders' equity

$1,027,201

$5,030,423

 


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 the belief that Ciena's strength offers further evidence of a shift in carrier spending - from costly, hard-to-scale legacy networks to more capital efficient, operationally-effective intelligent next-generation optical networks, that despite a challenging economic environment, Ciena continues to believe that it is possible to achieve 2001 revenue growth of between 95 to 105 percent over 2000 and that it is possible to achieve 2001 adjusted EPS within the current consensus range of sell-side analyst estimates of $0.72 to $0.75, provided the Company continues to successfully execute and macro economic conditions do not change dramatically, 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-Q filed with the Securities and Exchange Commission on May 17, 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