10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2014

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number: 0-21969

Ciena Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 23-2725311 (I.R.S. Employer Identification No.)

7035 Ridge Road, Hanover, MD (Address of Principal Executive Offices) 21076 (Zip Code)

(410) 694-5700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o (do not check if smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as determined in Rule 12b-2 of the Exchange Act). YES o NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at June 6, 2014
common stock, $0.01 par value	105,593,414

CIENA CORPORATION

INDEX

FORM 10-Q

	PAGE NUMBER
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	3
Condensed Consolidated Statements of Operations for the Quarters and Six Months Ended April 30, 2013 and April 30, 2014	3
Condensed Consolidated Statement of Comprehensive Income (Loss) for the Quarters and Six Months Ended April 30, 2013 and April 30, 2014	4
Condensed Consolidated Balance Sheets at October 31, 2013 and April 30, 2014	5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, 2013 and April 30, 2014	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	47
Item 4. Controls and Procedures	47
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	48
Item 1A. Risk Factors	48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3. Defaults Upon Senior Securities	58
Item 4. Mine Safety Disclosures	58
Item 5. Other Information	58
Item 6. Exhibits	59
Signatures	60

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Quarter Ended April 30,						Six Months Ended April 30,
	2013			2014			2013			2014
Revenue:
Products	$	413,217		$	460,821		$	766,274		$	893,762
Services	94,495			99,240			194,531			200,002
Total revenue	507,712			560,061			960,805			1,093,764
Cost of goods sold:
Products	239,441			257,632			435,962			502,848
Services	58,758			64,738			119,535			127,374
Total cost of goods sold	298,199			322,370			555,497			630,222
Gross profit	209,513			237,691			405,308			463,542
Operating expenses:
Research and development	100,787			103,492			189,912			204,989
Selling and marketing	74,475			83,662			141,063			162,010
General and administrative	30,883			31,882			59,091			61,979
Amortization of intangible assets	12,439			11,493			24,892			23,932
Restructuring costs	1,509			—			6,539			115
Total operating expenses	220,093			230,529			421,497			453,025
Income (loss) from operations	(10,580		)	7,162			(16,189		)	10,517
Interest and other income (loss), net	(2,716		)	(1,905		)	(2,853		)	(7,903		)
Interest expense	(11,392		)	(11,020		)	(22,124		)	(22,048		)
Loss on extinguishment of debt	—			—			(28,630		)	—
Loss before income taxes	(24,688		)	(5,763		)	(69,796		)	(19,434		)
Provision for income taxes	2,391			4,395			4,607			6,660
Net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)
Basic net loss per common share	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)
Diluted net loss per potential common share	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)
Weighted average basic common shares outstanding	101,913			105,451			101,560			104,977
Weighted average dilutive potential common shares outstanding	101,913			105,451			101,560			104,977

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Quarter Ended April 30,						Six Months Ended April 30,
	2013			2014			2013			2014
Net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)
Change in unrealized gain (loss) on available-for-sale securities, net of tax	13			10			(31		)	31
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax	(194		)	1,625			(117		)	(349		)
Change in cumulative translation adjustment	(2,004		)	935			(1,044		)	(4,165		)
Other comprehensive income (loss)	(2,185		)	2,570			(1,192		)	(4,483		)
Total comprehensive loss	$	(29,264	)	$	(7,588	)	$	(75,595	)	$	(30,577	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	October 31, 2013			April 30, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	346,487		$	325,083
Short-term investments	124,979			90,049
Accounts receivable, net	488,578			514,973
Inventories	249,103			293,952
Prepaid expenses and other	186,655			207,279
Total current assets	1,395,802			1,431,336
Long-term investments	15,031			15,042
Equipment, furniture and fixtures, net	119,729			119,876
Other intangible assets, net	185,828			155,117
Other long-term assets	86,380			74,093
Total assets	$	1,802,770		$	1,795,464
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	254,849		$	229,498
Accrued liabilities	271,656			254,436
Deferred revenue	88,550			118,473
Convertible notes payable	—			187,647
Total current liabilities	615,055			790,054
Long-term deferred revenue	23,620			23,820
Other long-term obligations	34,753			35,789
Long-term convertible notes payable	1,212,019			1,026,641
Total liabilities	1,885,447			1,876,304
Commitments and contingencies
Stockholders’ equity (deficit):
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding	—			—
Common stock – par value $0.01; 290,000,000 shares authorized; 103,705,709 and 105,584,958 shares issued and outstanding	1,037			1,056
Additional paid-in capital	5,893,880			5,926,276
Accumulated other comprehensive loss	(7,774		)	(12,258		)
Accumulated deficit	(5,969,820		)	(5,995,914		)
Total stockholders’ equity (deficit)	(82,677		)	(80,840		)
Total liabilities and stockholders’ equity (deficit)	$	1,802,770		$	1,795,464

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended April 30,
	2013			2014
Cash flows used in operating activities:
Net loss	$	(74,403	)	$	(26,094	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on extinguishment of debt	28,630			—
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements	28,857			27,143
Share-based compensation costs	18,147			23,443
Amortization of intangible assets	35,661			30,712
Provision for inventory excess and obsolescence	9,027			12,972
Provision for warranty	11,060			12,424
Other	5,068			10,164
Changes in assets and liabilities:
Accounts receivable	(76,526		)	(27,548		)
Inventories	2,975			(57,821		)
Prepaid expenses and other	(33,969		)	(19,054		)
Accounts payable, accruals and other obligations	24,805			(51,631		)
Deferred revenue	19,799			30,123
Net cash used in operating activities	(869		)	(35,167		)
Cash flows provided by (used in) investing activities:
Payments for equipment, furniture, fixtures and intellectual property	(21,496		)	(26,485		)
Restricted cash	1,679			1,912
Purchase of available for sale securities	(99,914		)	(95,033		)
Proceeds from maturities of available for sale securities	50,000			130,000
Settlement of foreign currency forward contracts, net	—			(4,029		)
Net cash provided by (used in) investing activities	(69,731		)	6,365
Cash flows from financing activities:
Payment of long term debt	(216,210		)	—
Payment for debt and equity issuance costs	(3,661		)	—
Payment of capital lease obligations	(1,427		)	(1,520		)
Proceeds from issuance of common stock	5,955			8,970
Net cash provided by (used in) financing activities	(215,343		)	7,450
Effect of exchange rate changes on cash and cash equivalents	(3		)	(52		)
Net decrease in cash and cash equivalents	(285,943		)	(21,352		)
Cash and cash equivalents at beginning of period	642,444			346,487
Cash and cash equivalents at end of period	$	356,498		$	325,083
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	15,720		$	17,047
Cash paid during the period for income taxes, net	$	5,136		$	7,221
Non-cash investing and financing activities
Purchase of equipment in accounts payable	$	3,006		$	4,799
Fixed assets acquired under capital leases	$	1,286		$	—

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CIENA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1)  INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein for Ciena Corporation (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, the financial statements included in this report reflect all normal recurring adjustments that Ciena considers necessary for the fair statement of the results of operations for the interim periods covered and of the financial position of Ciena at the date of the interim balance sheets. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of October 31, 2013 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. However, Ciena believes that the disclosures are adequate to understand the information presented herein. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with Ciena’s audited consolidated financial statements and the notes thereto included in Ciena’s annual report on Form 10-K for the fiscal year ended October 31, 2013.

Ciena has a 52 or 53-week fiscal year, which ends on the Saturday nearest to the last day of October of each year. Fiscal 2014 and 2013 are 52-week fiscal years. For purposes of financial statement presentation, each fiscal year is described as having ended on October 31, and the fiscal quarters are described as having ended on January 31, April 30 and July 31 of each fiscal year.

(2)  SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements and related disclosures in conformity with accounting principles generally

accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for selling prices for multiple element arrangements, share-based compensation, convertible notes payable valuations, bad debts, valuation of inventories and investments, recoverability of intangible assets, other long-lived assets, income taxes, warranty obligations, restructuring liabilities, derivatives, incentive compensation, contingencies and litigation. Ciena bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results may differ materially from management’s estimates.

Cash and Cash Equivalents

Ciena considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Restricted cash collateralizing letters of credit is included in other current assets and other long-term assets depending upon the duration of the restriction.

Investments

Ciena's investments are classified as available-for-sale and are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Ciena recognizes losses when it determines that declines in the fair value of its investments below their cost basis are other-than-temporary. In determining whether a decline in fair value is other-than-temporary, Ciena considers various factors including market price (when available), investment ratings, the financial condition and near-term prospects of the investee, the length of time and the extent to which the fair value has been less than Ciena's cost basis, and its intent and ability to hold the investment until maturity or for a period of time sufficient to allow for any anticipated recovery in market value. Ciena considers all marketable debt securities that it expects to convert to cash within one year or less to be short-term investments, with all others considered to be long-term investments.

Inventories

Inventories are stated at the lower of cost or market, with cost computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Ciena records a provision for excess and obsolete inventory when an impairment has been identified.

Segment Reporting

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Ciena's chief operating decision maker, its chief executive officer, evaluates the company's performance and allocates resources based on multiple factors, including measures of segment profit (loss). Operating segments are defined as components of an enterprise that engage in business activities that may earn revenue and incur expense, for which discrete financial information is available, and for which such information is evaluated regularly by the chief operating decision maker for purposes of allocating resources and assessing performance. Ciena considers the following to be its operating segments for reporting purposes: (i) Converged Packet Optical, (ii) Packet Networking, (iii) Optical Transport, and (iv) Software and Services. See Note 17 below.

Long-lived Assets

Long-lived assets include: equipment, furniture and fixtures; intangible assets; and maintenance spares. Ciena tests long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the asset's carrying amount is not recoverable from its undiscounted cash flows. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. Ciena's long-lived assets are assigned to asset groups which represent the lowest level for which cash flows can be identified.

Equipment, Furniture and Fixtures and Internal Use Software

Equipment, furniture and fixtures are recorded at cost. Depreciation and amortization are computed using the straight-line method over useful lives of two to five years for equipment, furniture and fixtures, and the shorter of useful life or lease term for leasehold improvements.

Qualifying internal use software and website development costs incurred during the application development stage, which consist primarily of outside services and purchased software license costs, are capitalized and amortized straight-line over the estimated useful lives of two to five years.

Intangible Assets

Ciena has recorded finite-lived intangible assets as a result of several acquisitions. Finite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the expected economic lives of the respective assets, up to seven years, which approximates the use of intangible assets.

Maintenance Spares

Maintenance spares are recorded at cost. Spares usage cost is expensed ratably over four years.

Concentrations

Substantially all of Ciena's cash and cash equivalents are maintained at a small number of major U.S. financial institutions. The majority of Ciena's cash equivalents consist of money market funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. Because these deposits generally may be redeemed upon demand, management believes that they bear minimal risk.

Historically, a significant percentage of Ciena's revenue has been concentrated among sales to a small number of large communications service providers. Consolidation among Ciena's customers has increased this concentration. Consequently, Ciena's accounts receivable are concentrated among these customers. See Note 17 below.

Additionally, Ciena's access to certain materials or components is dependent upon sole or limited source suppliers. The inability of any of these suppliers to fulfill Ciena's supply requirements, or significant changes in supply cost, could affect future results. Ciena relies on a small number of contract manufacturers to perform the majority of the manufacturing for its products. If Ciena cannot effectively manage these manufacturers and forecast future demand, or if these manufacturers fail to deliver products or components on time, Ciena's business and results of operations may suffer.

Revenue Recognition

Ciena recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectibility is reasonably assured. Customer purchase agreements and customer purchase orders are generally used to determine the existence of an

8

arrangement. Shipping documents and evidence of customer acceptance, when applicable, are used to verify delivery or services rendered. Ciena assesses whether the price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Ciena assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer's payment history. Revenue for maintenance services is generally deferred and recognized ratably over the period during which the services are performed. Shipping and handling fees billed to customers are included in revenue, with the associated expenses included in product cost of goods sold.

Ciena applies the percentage-of-completion method to long-term arrangements where it is required to undertake significant production, customizations or modification engineering, and reasonable and reliable estimates of revenue and cost are available. Utilizing the percentage-of-completion method, Ciena recognizes revenue based on the ratio of actual costs incurred to date to total estimated costs expected to be incurred. In instances that do not meet the percentage-of-completion method criteria, recognition of revenue is deferred until there are no uncertainties regarding customer acceptance. Unbilled percentage- of-completion revenues recognized are accumulated in the contracts in progress account included in accounts receivable, net. Billings in excess of revenues recognized to date on these contracts are recorded within deferred revenue.

Software revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. In instances where final acceptance criteria of the software are specified by the customer, revenue is deferred until there are no uncertainties regarding customer acceptance.

Ciena limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or refund privileges.

Revenue for multiple element arrangements is allocated to each unit of accounting based on the relative selling price of each delivered element, with revenue recognized for each delivered element when the revenue recognition criteria are met. Ciena determines the selling price for each deliverable based upon the selling price hierarchy for multiple-deliverable arrangements. Under this hierarchy, Ciena uses vendor-specific objective evidence ("VSOE") of selling price, if it exists, or third party evidence ("TPE") of selling price if VSOE does not exist. If neither VSOE nor TPE of selling price exists for a deliverable, Ciena uses its best estimate of selling price ("BESP") for that deliverable. For multiple element software arrangements where VSOE of undelivered maintenance does not exist, revenue for the entire arrangement is recognized over the maintenance term.

VSOE, when determinable, is established based on Ciena's pricing and discounting practices for the specific product or service when sold separately. In determining whether VSOE exists, Ciena requires that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range. Ciena has been unable to establish TPE of selling price because its go-to-market strategy differs from that of others in its markets, and the extent of customization and differentiated features and functions varies among comparable products or services from its peers. Ciena determines BESP based upon management-approved pricing guidelines, which consider multiple factors including the type of product or service, gross margin objectives, competitive and market conditions, and the go-to-market strategy, all of which can affect pricing practices.

Warranty Accruals

Ciena provides for the estimated costs to fulfill customer warranty obligations upon recognition of the related revenue. Estimated warranty costs include estimates for material costs, technical support labor costs and associated overhead. Warranty is included in cost of goods sold and is determined based upon actual warranty cost experience, estimates of component failure rates and management's industry experience. Ciena's sales contracts do not permit the right of return of the product by the customer after the product has been accepted.

Accounts Receivable, Net

Ciena's allowance for doubtful accounts is based on its assessment, on a specific identification basis, of the collectibility of customer accounts. Ciena performs ongoing credit evaluations of its customers and generally has not required collateral or other forms of security from its customers. In determining the appropriate balance for Ciena's allowance for doubtful accounts, management considers each individual customer account receivable in order to determine collectibility. In doing so, management considers creditworthiness, payment history, account activity and communication with the customer. If a customer's financial condition changes, Ciena may be required to record an allowance for doubtful accounts, which would negatively affect its results of operations.

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Research and Development

Ciena charges all research and development costs to expense as incurred. Types of expense incurred in research and development include employee compensation, cost of prototype equipment, consulting and third party services, depreciation, facility costs and information technology.

Government Grants

Ciena accounts for proceeds from government grants as a reduction of operating expense when there is reasonable assurance that Ciena has complied with the conditions attached to the grant and that the grant proceeds will be received. Grant benefits are recorded to the line item in the Condensed Consolidated Statement of Operations to which the grant activity relates. See Note 18 below.

Advertising Costs

Ciena expenses all advertising costs as incurred.

Legal Costs

Ciena expenses legal costs associated with litigation defense as incurred.

Share-Based Compensation Expense

Ciena measures and recognizes compensation expense for share-based awards based on estimated fair values on the date of grant. Ciena estimates the fair value of each option-based award on the date of grant using the Black-Scholes option-pricing model. This model is affected by Ciena's stock price as well as estimates regarding a number of variables, including expected stock price volatility over the expected term of the award and projected employee stock option exercise behaviors. Ciena estimates the fair value of each restricted stock unit award based on the fair value of the underlying common stock on the date of grant. In each case, Ciena only recognizes expense in its Condensed Consolidated Statement of Operations for those stock options or restricted stock units that are ultimately expected to vest. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon its determination of whether it is probable that the performance targets will be achieved. At each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. Ciena uses the straight-line method to record expense for share-based awards with only service-based vesting. See Note 16 below.

Income Taxes

Ciena accounts for income taxes using an asset and liability approach that recognizes deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, and for operating loss and tax credit carryforwards. In estimating future tax consequences, Ciena considers all expected future events other than the enactment of changes in tax laws or rates. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. In addition, tax authorities periodically audit Ciena's income tax returns. These audits examine significant tax filing positions, including the timing and amounts of deductions and the allocation of income tax expenses among tax jurisdictions. Ciena is currently under audit in India for 2008 through 2012 and in Canada for 2010 through 2012. Management does not expect the outcome of these audits to have a material adverse effect on Ciena's consolidated financial position, results of operations or cash flows. Ciena's major tax jurisdictions and the earliest open tax years are as follows: United States (2010), United Kingdom (2012), Canada (2009) and India (2008). However, limited adjustments can be made to Federal U.S. tax returns in earlier years in order to reduce net operating loss carryforwards. Ciena classifies interest and penalties related to uncertain tax positions as a component of income tax expense. All of the uncertain tax positions, if recognized, would decrease the effective income tax rate.

Ciena has not provided for U.S. deferred income taxes on the cumulative unremitted earnings of its non-U.S. affiliates, as it plans to indefinitely reinvest cumulative unremitted foreign earnings outside the U.S., and it is not practicable to determine the unrecognized deferred income taxes. These cumulative unremitted foreign earnings relate to ongoing operations in foreign jurisdictions and will be used to fund foreign operations, capital expenditures and any expansion requirements.

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Ciena recognizes windfall tax benefits associated with the exercise of stock options or release of restricted stock units directly to stockholders' equity only when realized. A windfall tax benefit occurs when the actual tax benefit realized by Ciena upon an employee's disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that Ciena had recorded. When assessing whether a tax benefit relating to share-based compensation has been realized, Ciena follows the tax law “with-and-without” method. Under the with-and-without method, the windfall is considered realized and recognized for financial statement purposes only when an incremental benefit is provided after considering all other tax benefits including Ciena's net operating losses. The with-and-without method results in the windfall from share-based compensation awards always being effectively the last tax benefit to be considered. Consequently, the windfall attributable to share-based compensation will not be considered realized in instances where Ciena's net operating loss carryover (that is unrelated to windfalls) is sufficient to offset the current year's taxable income before considering the effects of current-year windfalls.

Loss Contingencies

Ciena is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. Ciena considers the likelihood of loss or the incurrence of a liability, as well as Ciena's ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Ciena regularly evaluates current information available to it in order to determine whether any accruals should be adjusted and whether new accruals are required.

Fair Value of Financial Instruments

The carrying value of Ciena's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair market value due to the relatively short period of time to maturity. For information related to the fair value of Ciena's convertible notes, see Note 13 below.

Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Ciena utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:

• Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 inputs are quoted prices for identical or similar assets or liabilities in less active markets or model-derived valuations in which significant inputs are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

• Level 3 inputs are unobservable inputs based on Ciena's assumptions used to measure assets and liabilities at fair value.

By distinguishing between inputs that are observable in the marketplace, and therefore more objective, and those that are unobservable and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Restructuring

From time to time, Ciena takes actions to better align its workforce, facilities and operating costs with perceived market opportunities, business strategies and changes in market and business conditions. GAAP requires that a liability for the cost associated with an exit or disposal activity be recognized in the period in which the liability is incurred, except for one-time employee termination benefits related to a service period of more than 60 days, which are accrued over the service period. See Note 3 below.

Foreign Currency

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Some of Ciena's foreign branch offices and subsidiaries use the U.S. dollar as their functional currency because Ciena, as the U.S. parent entity, exclusively funds the operations of these branch offices and subsidiaries. For those subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and the statement of operations is translated at a monthly average rate. Resulting translation adjustments are recorded directly to a separate component of stockholders' equity. Where the monetary assets and liabilities are transacted in a currency other than the entity's functional currency, re-measurement adjustments are recorded in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. Interest and other income (loss), net reflects a net loss on foreign currency re-measurement and exchange rate changes of $3.0 million for the six months ended April 30, 2013 and a net gain of $5.3 million for the six months ended April 30, 2014.

Derivatives

Ciena's 4.0% convertible senior notes due March 15, 2015 (the "2015 Notes") include a redemption feature that is accounted for as a separate embedded derivative. The embedded redemption feature is recorded at fair value on a recurring basis, and these changes are included in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. Interest and other income (loss), net reflects an increase in fair value of $0.4 million for the six months ended April 30, 2013 and a reduction in fair value of $2.6 million for the six months ended April 30, 2014.

From time to time, Ciena uses foreign currency forward contracts to reduce variability in certain forecasted non-U.S.-dollar denominated cash flows. Generally, these derivatives have maturities of 12 months or less and are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, Ciena assesses whether the forward contract has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The effective portion of the derivative's net gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and upon the occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Condensed Consolidated Statement of Operations to which the hedged transaction relates. Any net gain or loss associated with the ineffectiveness of the hedging instrument is reported in interest and other income (loss), net.

From time to time, Ciena uses foreign currency forwards to hedge certain balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. Interest and other income (loss), net reflects losses of $0.1 million and $10.2 million related to foreign currency forward contracts for the six months ended April 30, 2013 and 2014, respectively. See Note 12 below.

Ciena records derivative instruments in the Condensed Consolidated Statement of Cash Flows within operating, investing, or financing activities consistent with the cash flows of the hedged items.

Computation of Net Income (Loss) per Share

Ciena calculates basic earnings per share ("EPS") by dividing earnings attributable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS includes other potential dilutive shares that would be outstanding if securities or contracts to issue common stock were exercised or converted into common stock. Ciena uses a dual presentation of basic and diluted EPS on the face of its income statement. A reconciliation of the numerator and denominator used for the basic and diluted EPS computations is set forth in Note 15 below.

Software Development Costs

Ciena develops software for sale to its customers. GAAP requires the capitalization of certain software development costs that are incurred subsequent to the date technological feasibility is established and prior to the date the product is generally available for sale. The capitalized cost is then amortized straight-line over the estimated life of the product. Ciena defines technological feasibility as being attained at the time a working model is completed. To date, the period between Ciena achieving technological feasibility and the general availability of such software has been short, and software development costs qualifying for capitalization have been insignificant. Accordingly, Ciena has not capitalized any software development costs.

Newly Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board ("FASB") issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update was effective for Ciena beginning in the first quarter of fiscal 2014.

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Ciena has determined that reclassifications from other comprehensive income to net income are immaterial for separate financial statement presentation.

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) which provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. The standard will be effective for Ciena beginning in the first quarter of fiscal 2018. Ciena is currently evaluating the impact of the adoption of this accounting standard update on its condensed consolidated financial statements.

(3) RESTRUCTURING COSTS

Ciena has undertaken a number of restructuring activities intended to reduce expense and better align its workforce and costs with market opportunities, product development and business strategies. The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the six months ended April 30, 2014 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2013	$	80		$	1,936		$	2,016
Additional liability recorded	106			9			115
Cash payments	(136		)	(178		)	(314		)
Balance at April 30, 2014	$	50		$	1,767		$	1,817
Current restructuring liabilities	$	50		$	627		$	677
Non-current restructuring liabilities	$	—		$	1,140		$	1,140

The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the six months ended April 30, 2013 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2012	$	1,449		$	3,600		$	5,049
Additional liability recorded	4,916			1,623			6,539
Non-cash disposal	—			(735		)	(735		)
Cash payments	(5,733		)	(2,153		)	(7,886		)
Balance at April 30, 2013	$	632		$	2,335		$	2,967
Current restructuring liabilities	$	632		$	1,606		$	2,238
Non-current restructuring liabilities	$	—		$	729		$	729

(4) SHORT-TERM AND LONG-TERM INVESTMENTS

As of the dates indicated, short-term and long-term investments are comprised of the following (in thousands):

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	April 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	60,042	$	16	—		$	60,058
Included in long-term investments	14,997		45		—		15,042
	$	75,039	$	61	$	—	$	75,100
Commercial paper:
Included in short-term investments	29,991		—		—		29,991
	$	29,991	$	—	$	—	$	29,991

	October 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	99,974	$	11	$	—	$	99,985
Included in long-term investments	14,996		35		—		15,031
	$	114,970	$	46	$	—	$	115,016
Commercial paper:
Included in short-term investments	24,994		—		—		24,994
	$	24,994	$	—	$	—	$	24,994

The following table summarizes final legal maturities of debt investments at April 30, 2014 (in thousands):

	Amortized Cost		Estimated Fair Value
Less than one year	$	90,033	$	90,049
Due in 1-2 years	14,997		15,042
	$	105,030	$	105,091

(5) FAIR VALUE MEASUREMENTS

As of the date indicated, the following table summarizes the fair value of assets and liabilities that are recorded at fair value on a recurring basis (in thousands):

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	April 30, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	226,925	$	—	$	—	$	226,925
U.S. government obligations	—		75,100		—		75,100
Commercial paper	—		49,989		—		49,989
Foreign currency forward contracts	—		296		—		296
Embedded redemption feature	—		—		190		190
Total assets measured at fair value	$	226,925	$	125,385	$	190	$	352,500
Liabilities:
Foreign currency forward contracts	$	—	$	3,548	$	—	$	3,548
Total liabilities measured at fair value	$	—	$	3,548	$	—	$	3,548

As of the date indicated, the assets and liabilities above were presented on Ciena’s Condensed Consolidated Balance Sheet as follows (in thousands):

	April 30, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	226,782	$	19,998	$	—	$	246,780
Short-term investments	—		90,049		—		90,049
Prepaid expenses and other	52		296		190		538
Long-term investments	—		15,042		—		15,042
Other long-term assets	91		—		—		91
Total assets measured at fair value	$	226,925	$	125,385	$	190	$	352,500
Liabilities:
Accrued liabilities	$	—	$	3,548	$	—	$	3,548
Total liabilities measured at fair value	$	—	$	3,548	$	—	$	3,548

Ciena’s Level 3 assets included in other long-term assets reflect an embedded redemption feature contained within the 2015 Notes. The embedded redemption feature is bifurcated from the 2015 Notes using the “with-and-without” approach. As such, the total value of the embedded redemption feature is calculated as the difference between the value of the 2015 Notes (the “Hybrid Instrument”) and the value of an identical instrument without the embedded redemption feature (the “Host Instrument”). Both the Host Instrument and the Hybrid Instrument are valued using a modified binomial model. The modified binomial model utilizes a risk free interest rate, an implied volatility of Ciena’s stock, the recovery rates of bonds and the implied default intensity of the 2015 Notes.

As of the dates indicated, the following table sets forth, in thousands, the reconciliation of changes in fair value measurements of Level 3 assets:

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	Level 3
Balance at October 31, 2013	$	2,740
Issuances	—
Settlements	—
Changes in unrealized gain (loss)	(2,550		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at April 30, 2014	$	190

(6)  ACCOUNTS RECEIVABLE

As of October 31, 2013, two customers each accounted for greater than 10% of net accounts receivable and in the aggregate accounted for 22.5% of net accounts receivable. As of April 30, 2014, two customers each accounted for greater than 10% of net accounts receivable, and in the aggregate accounted for 22.8% of net accounts receivable. Allowance for doubtful accounts was $2.0 million and $1.7 million as of October 31, 2013 and April 30, 2014, respectively. Ciena has not historically experienced a significant amount of bad debt expense.

(7) INVENTORIES

As of the dates indicated, inventories are comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Raw materials	$	53,274		$	56,689
Work-in-process	7,773			7,919
Finished goods	153,855			181,020
Deferred cost of goods sold	75,764			95,783
	290,666			341,411
Provision for excess and obsolescence	(41,563		)	(47,459		)
	$	249,103		$	293,952

Ciena writes down its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand and market conditions. During the first six months of fiscal 2014, Ciena recorded a provision for excess and obsolescence of $13.0 million, primarily related to engineering design changes and the discontinuance of certain parts and components used in the manufacture of our Optical Transport products, including our Corestream® Agility Optical Transport platform, and Converged Packet Optical products. Deductions from the provision for excess and obsolete inventory relate to disposal activities.

(8) PREPAID EXPENSES AND OTHER

As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Prepaid VAT and other taxes	$	101,072	$	106,790
Deferred deployment expense	23,190		25,123
Product demonstration equipment, net	33,382		43,184
Prepaid expenses	16,963		15,244
Embedded redemption feature	—		190
Other non-trade receivables	11,996		16,696
Restricted cash	52		52
	$	186,655	$	207,279

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Depreciation of product demonstration equipment was $3.5 million and $4.2 million for the first six months of fiscal 2013 and 2014, respectively.

(9) EQUIPMENT, FURNITURE AND FIXTURES

As of the dates indicated, equipment, furniture and fixtures are comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Equipment, furniture and fixtures	$	364,574		$	379,569
Leasehold improvements	46,247			46,442
	410,821			426,011
Accumulated depreciation and amortization	(291,092		)	(306,135		)
	$	119,729		$	119,876

The total of depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements, was $25.4 million and $22.9 million for the first six months of fiscal 2013 and 2014, respectively.

(10)  OTHER INTANGIBLE ASSETS

As of the dates indicated, other intangible assets are comprised of the following (in thousands):

	October 31, 2013							April 30, 2014
	Gross Intangible		Accumulated Amortization			Net Intangible		Gross Intangible		Accumulated Amortization			Net Intangible
Developed technology	$	417,833	$	(321,645	)	$	96,188	$	417,833	$	(338,428	)	$	79,405
Patents and licenses	46,538		(45,744		)	794		46,538		(45,826		)	712
Customer relationships, covenants not to compete, outstanding purchase orders and contracts	323,573		(234,727		)	88,846		323,573		(248,573		)	75,000
Total other intangible assets	$	787,944	$	(602,116	)	$	185,828	$	787,944	$	(632,827	)	$	155,117

The amortization of finite-lived other intangible assets was $35.7 million and $30.7 million for the first six months of fiscal 2013 and 2014, respectively. Expected future amortization of finite-lived other intangible assets for the fiscal years indicated is as follows (in thousands):

Period ended October 31,
2014 (remaining six months)	$	26,439
2015	52,879
2016	52,879
2017	22,783
2018	137
	$	155,117

(11) OTHER BALANCE SHEET DETAILS

As of the dates indicated, other long-term assets are comprised of the following (in thousands):

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	October 31, 2013		April 30, 2014
Maintenance spares inventory, net	$	61,305	$	56,090
Deferred debt issuance costs, net	15,677		13,302
Embedded redemption feature	2,740		—
Restricted cash	2,053		141
Other	4,605		4,560
	$	86,380	$	74,093

Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate method, through the maturity of the related debt. Amortization of debt issuance costs related to our convertible notes payable and the Credit Facility (described in Note 14 below), which is included in interest expense, was $3.0 million and $2.4 million during the first six months of fiscal 2013 and fiscal 2014, respectively.

As of the dates indicated, accrued liabilities are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Warranty	$	56,303	$	56,167
Compensation, payroll related tax and benefits	98,770		64,113
Vacation	32,118		34,503
Current restructuring liabilities	674		677
Interest payable	6,186		6,179
Other	77,605		92,797
	$	271,656	$	254,436

The following table summarizes the activity in Ciena’s accrued warranty for the fiscal periods indicated (in thousands):

						Balance at
Six months ended	Beginning					end of
April 30,	Balance		Provisions	Settlements		period
2013	$	55,132	11,060	(11,463	)	$	54,729
2014	$	56,303	12,424	(12,560	)	$	56,167

As of the dates indicated, deferred revenue is comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Products	$	36,671		$	64,326
Services	75,499			77,967
	112,170			142,293
Less current portion	(88,550		)	(118,473		)
Long-term deferred revenue	$	23,620		$	23,820

(12)  FOREIGN CURRENCY FORWARD CONTRACTS

As of April 30, 2014, Ciena had forward contracts to reduce the variability in its Canadian Dollar and Indian Rupee denominated expense, which expense principally relates to research and development activities. These derivative contracts have been designated as cash flow hedges. During the first six months of fiscal 2014, in order to hedge certain balance sheet exposures, Ciena entered into forward contracts to sell Brazilian Real and buy an equivalent U.S. Dollar amount and forward

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contracts to sell U.S. Dollars and buy an equivalent amount of Canadian Dollars. These derivative contracts have not been designated as hedges. Ciena's foreign currency forward contracts are immaterial for separate financial statement presentation.

(13)  CONVERTIBLE NOTES PAYABLE

The principal balance, unamortized discount and net carrying amount of the liability and equity components of our 4.0% convertible senior notes due December 15, 2020 Notes ("2020 Notes") were as follows as of April 30, 2014:

	Liability Component						Equity Component
	Principal Balance		Unamortized Discount		Net Carrying Amount		Net Carrying Amount
4.0% Convertible Senior Notes due December 15, 2020	$	192,216	$	15,575	$	176,641	$	43,131

The following table sets forth, in thousands, the carrying value and the estimated fair value of Ciena’s outstanding convertible notes:

	April 30, 2014
	Carrying Value		Fair Value(2)
4.0% Convertible Senior Notes, due March 15, 2015 (1)	187,647		214,805
0.875% Convertible Senior Notes due June 15, 2017	500,000		494,375
3.75% Convertible Senior Notes due October 15, 2018	350,000		448,875
4.0% Convertible Senior Notes due December 15, 2020 (3)	176,641		246,797
	$	1,214,288	$	1,404,852

(1) Includes unamortized bond premium related to embedded redemption feature.

(2) The convertible notes were categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its outstanding convertible notes using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

(3) Includes unamortized discount and accretion of principal.

(14) CREDIT FACILITY

During fiscal 2012, Ciena entered into a $150.0 million senior secured asset-based revolving credit facility (the “Credit Facility”). The Credit Facility matures on August 13, 2015, provided that it will mature early on December 15, 2014, if any of Ciena's 4.0% senior convertible notes due March 15, 2015 are then outstanding. Ciena principally uses and expects to continue to use the Credit Facility to support the issuance of letters of credit that arise in the ordinary course of its business and thereby to reduce its use of cash required to collateralize these instruments. As of April 30, 2014, letters of credit totaling $58.7 million were collateralized by the Credit Facility. There were no borrowings outstanding under the Credit Facility as of April 30, 2014.

(15)  EARNINGS (LOSS) PER SHARE CALCULATION

The following table (in thousands except per share amounts) is a reconciliation of the numerator and denominator of the basic net income (loss) per common share (“Basic EPS”) and the diluted net income (loss) per potential common share (“Diluted EPS”). Because the numerator reflects net losses for the periods indicated, both Basic EPS and Diluted EPS are computed using the weighted average number of common shares outstanding. Were the numerator to reflect net income, Diluted EPS would also include, to the extent the effect is not anti-dilutive, the following: (i) common shares outstanding, (ii) shares issuable upon vesting of restricted stock units, (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method, and (iv) shares underlying Ciena’s outstanding convertible notes.

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	Quarter Ended April 30,						Six Months Ended April 30,
Numerator	2013			2014			2013			2014
Net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)

	Quarter Ended April 30,		Six Months Ended April 30,
Denominator	2013	2014	2013	2014
Weighted average basic common shares outstanding	101,913	105,451	101,560	104,977
Weighted average dilutive potential common shares outstanding	101,913	105,451	101,560	104,977

	Quarter Ended April 30,						Six Months Ended April 30,
EPS	2013			2014			2013			2014
Basic EPS	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)
Diluted EPS	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)

The following table summarizes the weighted average shares excluded from the calculation of the denominator for Basic and Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands):

	Quarter Ended April 30,		Six Months Ended April 30,
	2013	2014	2013	2014
Shares underlying stock options and restricted stock units	4,267	3,256	4,366	3,430
0.25% Convertible Senior Notes due May 1, 2013	5,288	—	5,379	—
4.0% Convertible Senior Notes due March 15, 2015	9,198	9,198	11,891	9,198
0.875% Convertible Senior Notes due June 15, 2017	13,108	13,108	13,108	13,108
3.75% Convertible Senior Notes due October 15, 2018	17,356	17,356	17,356	17,356
4.0% Convertible Senior Notes due December 15, 2020	9,198	9,198	6,505	9,198
Total shares excluded due to anti-dilutive effect	58,415	52,116	58,605	52,290

(16) SHARE-BASED COMPENSATION EXPENSE

Ciena grants equity awards under its 2008 Omnibus Incentive Plan (the "2008 Plan") and the Amended and Restated Employee Stock Purchase Plan (the “ESPP”). These plans were approved by stockholders and are described in Ciena’s Annual Report on Form 10-K for the fiscal year ended October 31, 2013.

2008 Omnibus Incentive Plan

The 2008 Plan authorizes the issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock, stock appreciation rights (SARs) and other equity and/or cash performance incentive awards to employees, directors, and consultants of Ciena. Subject to certain restrictions, the Compensation Committee of the Board of Directors has broad discretion to establish the terms and conditions for awards under the 2008 Plan, including the number of shares, vesting conditions, and the required service or performance criteria. Options and SARs have a maximum term of ten years, and their exercise price may not be less than 100% of fair market value on the date of grant. Repricing of stock options and SARs is prohibited without stockholder approval. Certain change in control transactions may cause awards granted under the 2008 Plan to vest, unless the awards are continued or substituted for in connection with the transaction. Pursuant to Board and stockholder approval, effective April 10, 2014, Ciena amended its 2008 Plan to increase the number of shares available for issuance by 6.6 million shares. The total number of shares authorized for issuance under the 2008 Plan is 25.1 million shares. As of April 30, 2014, approximately 9.2 million shares remained available for issuance under the 2008 Plan.

Stock Options

Outstanding stock option awards to employees are generally subject to service-based vesting restrictions and vest incrementally over a four-year period. As of April 30, 2014, all outstanding options have completed their service-based vesting conditions and are fully vested. The following table is a summary of Ciena’s stock option activity for the period indicated (shares in thousands):

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	Shares Underlying Options Outstanding		Weighted Average Exercise Price
Balance at October 31, 2013	2,102		$	27.46
Exercised	(108	)	17.82
Canceled	(379	)	42.39
Balance at April 30, 2014	1,615		$	24.60

The total intrinsic value of options exercised during the first six months of fiscal 2013 and fiscal 2014 was $0.3 million and $0.7 million, respectively. Ciena did not grant any stock options during the first six months of fiscal 2013 or fiscal 2014.

The following table summarizes information with respect to stock options outstanding at April 30, 2014, based on Ciena’s closing stock price on the last trading day of Ciena’s second fiscal quarter of 2014 (shares and intrinsic value in thousands):

					Options Outstanding and Vested at
					April 30, 2014
					Number	Weighted Average Remaining	Weighted
Range of					of	Contractual	Average		Aggregate
Exercise					Underlying	Life	Exercise		Intrinsic
Price					Shares	(Years)	Price		Value
$	0.94	—	$	16.31	174	3.66	$	8.25	$	1,929
$	16.52	—	$	17.29	264	1.17	16.64		710
$	17.43	—	$	24.50	353	1.02	20.45		242
$	24.69	—	$	28.28	335	2.50	27.01		—
$	28.61	—	$	31.43	103	3.30	29.80		—
$	31.71	—	$	32.55	21	3.22	31.92		—
$	33.00	—	$	37.10	249	3.55	35.23		—
$	37.45	—	$	46.44	116	3.28	44.30		—
$	0.94	—	$	46.44	1,615	2.36	$	24.60	$	2,881

Assumptions for Option-Based Awards

Ciena recognizes the fair value of service-based options as share-based compensation expense on a straight-line basis over the requisite service period.

Restricted Stock Units

A restricted stock unit is a stock award that entitles the holder to receive shares of Ciena common stock as the unit vests. Ciena’s outstanding restricted stock unit awards are subject to service and/or performance-based vesting conditions. Awards subject to service-based conditions typically vest in increments over a three or four-year period. Awards with performance-based vesting conditions require the achievement of certain operational, financial or other performance criteria or targets as a condition of vesting, or the acceleration of vesting, of such awards. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based compensation expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon Ciena’s determination of whether it is probable that the performance targets will be achieved. At each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets.

The following table is a summary of Ciena’s restricted stock unit activity for the period indicated, with the aggregate fair value of the balance outstanding at the end of each period, based on Ciena’s closing stock price on the last trading day of the relevant period (shares and aggregate fair value in thousands):

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	Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value Per Share		Aggregate Fair Value
Balance at October 31, 2013	4,419		$	15.33	$	102,745
Granted	1,745
Vested	(1,252	)
Canceled or forfeited	(99	)
Balance at April 30, 2014	4,813		$	17.67	$	93,052

The total fair value of restricted stock units that vested and were converted into common stock during the first six months of fiscal 2013 and fiscal 2014 was $15.9 million and $29.1 million, respectively. The weighted average fair value of each restricted stock unit granted by Ciena during the first six months of fiscal 2013 and fiscal 2014 was $15.75 and $21.95 respectively.

Assumptions for Restricted Stock Unit Awards

The fair value of each restricted stock unit award is based on the closing price on the date of grant. Share-based expense for service-based restricted stock unit awards is recognized, net of estimated forfeitures, ratably over the vesting period on a straight-line basis.

Share-based expense for performance-based restricted stock unit awards, net of estimated forfeitures, is recognized ratably over the performance period based upon Ciena's determination of whether it is probable that the performance targets will be achieved. At each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. The estimation of whether the performance targets will be achieved involves judgment, and the estimate of expense is revised periodically based on the probability of achieving the performance targets. Revisions are reflected in the period in which the estimate is changed. If any performance goals are not met, no compensation cost is ultimately recognized against that goal, and, to the extent previously recognized, compensation cost is reversed.

Because share-based compensation expense is recognized only for those awards that are ultimately expected to vest, the amount of share-based compensation expense recognized reflects a reduction for estimated forfeitures. Ciena estimates forfeitures at the time of grant and revises those estimates in subsequent periods based upon new or changed information.

Amended and Restated Employee Stock Purchase Plan (ESPP)

Under the ESPP, eligible employees may enroll in a twelve-month offer period that begins in December and June of each year. Each offer period includes twosix-month purchase periods. Employees may purchase a limited number of shares of Ciena common stock at 85% of the fair market value on either the day immediately preceding the offer date or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of share-based compensation expense. Pursuant to the ESPP's “evergreen” provision, on December 31 of each year, the number of shares available under the ESPP increases by up to 0.6 million shares, provided that the total number of shares available at that time shall not exceed 8.2 million. Unless earlier terminated, the ESPP will terminate on January 24, 2023.

During the first six months of fiscal 2014, Ciena issued 0.5 million shares under the ESPP. At April 30, 2014, 7.3 million shares remained available for issuance under the ESPP.

Share-Based Compensation Expense for Periods Reported

The following table summarizes share-based compensation expense for the periods indicated (in thousands):

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	Quarter Ended April 30,					Six Months Ended April 30,
	2013			2014		2013			2014
Product costs	$	686		$	741	$	1,247		$	1,247
Service costs	435			568		862			1,148
Share-based compensation expense included in cost of sales	1,121			1,309		2,109			2,395
Research and development	2,204			2,782		4,237			5,354
Sales and marketing	3,382			4,246		6,125			8,309
General and administrative	3,144			3,661		5,700			7,167
Share-based compensation expense included in operating expense	8,730			10,689		16,062			20,830
Share-based compensation expense capitalized in inventory, net	(24		)	53		(24		)	218
Total share-based compensation	$	9,827		$	12,051	$	18,147		$	23,443

As of April 30, 2014, total unrecognized share-based compensation expense related to unvested restricted stock units,was $72.4 million, and this expense is expected to be recognized over a weighted-average period of 1.5 years.

(17)  SEGMENTS AND ENTITY WIDE DISCLOSURES

Segment Reporting

Ciena’s internal organizational structure and the management of its business are grouped into the following operating segments:

• Converged Packet Optical — includes networking solutions optimized for the convergence of coherent optical transport, OTN switching and packet switching. These platforms enable automated packet-optical infrastructures that create and efficiently allocate high-capacity bandwidth for the delivery of a wide variety of enterprise and consumer-oriented network services. Products in this segment include the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, which feature Ciena's WaveLogic coherent optical processors. Products also include Ciena's family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. These products include multiservice, multi-protocol switching systems that consolidate the functionality of an add/drop multiplexer, digital cross-connect and packet switch into a single, high-capacity intelligent switching system. These products address both the core and metro segments of communications networks and support key managed services, Ethernet/TDM Private Line, Triple Play and IP services. This segment also includes sales of operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Packet Networking — principally includes Ciena's 3000 family of service delivery switches and service aggregation switches, the 5000 series of service aggregation switches, and its Ethernet packet configuration for the 5410 Service Aggregation Switch. These products support the access and aggregation tiers of communications networks and have principally been deployed to support wireless backhaul infrastructures and business data services. Employing sophisticated, carrier-grade Ethernet switching technology, these products deliver quality of service capabilities, virtual local area networking and switching functions, and carrier-grade operations, administration, and maintenance features. This segment includes stand-alone broadband products that transition voice networks to support Internet-based (IP) telephony, video services and DSL. This segment also includes sales of operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Optical Transport — includes optical transport solutions that add capacity to core, regional and metro networks and enable cost-effective and efficient transport of voice, video and data traffic at high transmission speeds. Ciena's principal products in this segment include the 4200 Advanced Services Platform, Corestream® Agility Optical Transport System, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL), and 6100 Multiservice Optical Platform. This segment includes sales from SONET/SDH, transport and data networking products, as well as certain enterprise-oriented transport solutions that support storage and LAN extension, interconnection of data centers, and virtual private networks. This segment also includes operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

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• Software and Services — includes Ciena's network software suite, including the OneControl Unified Management System, an integrated network and service management software designed to automate and simplify network management, operation and service delivery. These software solutions can track individual services across multiple product suites, facilitating planned network maintenance, outage detection and identification of customers or services affected by network performance. This segment includes the ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and network level applications. This segment includes a broad range of consulting, network design and support services from Ciena's Network Transformation Solutions offering. This segment also includes installation and deployment, maintenance support and training activities. Except for revenue from the software portion of this segment, which is included in product revenue, revenue from this segment is included in services revenue on the Condensed Consolidated Statement of Operations.

Asset information for reportable segments is not disclosed because it is not reviewed by the chief operating decision maker for purposes of evaluating performance and allocating resources.

Segment Revenue

The table below (in thousands) sets forth Ciena’s segment revenue for the respective periods:

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
Revenue:
Converged Packet Optical	$	294,325	$	356,840	$	534,285	$	690,241
Packet Networking	54,190		66,526		100,027		118,235
Optical Transport	57,371		29,616		114,968		69,713
Software and Services	101,826		107,079		211,525		215,575
Consolidated revenue	$	507,712	$	560,061	$	960,805	$	1,093,764

Segment Profit

Segment profit is determined based on internal performance measures used by the chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; amortization of intangible assets; restructuring costs; interest and other income (loss), net; interest expense; loss on extinguishment of debt and provisions for income taxes.

The table below (in thousands) sets forth Ciena’s segment profit and the reconciliation to consolidated net loss during the respective periods indicated:

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	Quarter Ended April 30,						Six Months Ended April 30,
	2013			2014			2013			2014
Segment profit:
Converged Packet Optical	$	57,528		$	96,581		$	104,646		$	175,279
Packet Networking	2,556			8,196			7,639			8,581
Optical Transport	21,413			4,709			42,000			20,359
Software and Services	27,229			24,713			61,111			54,334
Total segment profit	108,726			134,199			215,396			258,553
Less: non-performance operating expenses
Selling and marketing	74,475			83,662			141,063			162,010
General and administrative	30,883			31,882			59,091			61,979
Amortization of intangible assets	12,439			11,493			24,892			23,932
Restructuring costs	1,509			—			6,539			115
Add: other non-performance financial items
Interest expense and other income (loss), net	(14,108		)	(12,925		)	(24,977		)	(29,951		)
Loss on extinguishment of debt	—			—			(28,630		)	—
Less: Provision for income taxes	2,391			4,395			4,607			6,660
Consolidated net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)

Entity Wide Reporting

The following table reflects Ciena’s geographic distribution of revenue based on the location of the purchaser, with any country accounting for a significant percentage of total revenue in the period specifically identified. Revenue attributable to geographic regions outside of the United States is reflected as International revenue. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
United States	$	287,572	$	323,927	$	551,807	$	641,377
International	220,140		236,134		408,998		452,387
Total	$	507,712	$	560,061	$	960,805	$	1,093,764

The following table reflects Ciena's geographic distribution of equipment, furniture and fixtures, net, with any country accounting for a significant percentage of total equipment, furniture and fixtures, net, specifically identified. Equipment, furniture and fixtures, net, attributable to geographic regions outside of the United States and Canada are reflected as “Other International.” For the periods below, Ciena's geographic distribution of equipment, furniture and fixtures was as follows (in thousands):

	October 31, 2013		April 30, 2014
United States	$	64,132	$	64,415
Canada	43,772		42,978
Other International	11,825		12,483
Total	$	119,729	$	119,876

For the periods below, customers accounting for at least 10% of Ciena’s revenue were as follows (in thousands):

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	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
Company A	$	101,531	$	120,582	$	173,210	$	221,044
Company B	57,293		n/a		105,356		n/a
Total	$	158,824	$	120,582	$	278,566	$	221,044

________________________________

n/a Denotes revenue representing less than 10% of total revenue for the period

The customers identified above purchased products and services from each of Ciena's operating segments.

(18)  COMMITMENTS AND CONTINGENCIES

Ontario Grant

Ciena was awarded a conditional grant from the Province of Ontario in June 2011. Under this strategic jobs investment fund grant, Ciena can receive up to an aggregate of C$25.0 million in funding for eligible costs relating to certain next-generation, coherent optical transport development initiatives over the period from November 1, 2010 to October 31, 2015. Ciena anticipates receiving disbursements, approximating C$5.0 million per fiscal year, over the period above. Amounts received under the grant are subject to recoupment in the event that Ciena fails to achieve certain minimum investment, employment and project milestones. As of April 30, 2014, Ciena has recorded a C$20.0 million benefit to date as a reduction in research and development expenses, of which C$3.6 million was recorded in the first six months of fiscal 2014. As of April 30, 2014, amounts receivable from this grant were C$3.6 million.

Foreign Tax Contingencies

As of October 31, 2013 and April 30, 2014, Ciena had accrued liabilities of $0.4 million related to a preliminary assessment notice from the India tax authorities asserting deficiencies in payments for the tax year 2009 related to income taxes. This contingency has been reported as a component of other long-term liabilities. During February 2014, Ciena received a final audit assessment notice from the India tax authorities with respect to this matter. Ciena has filed an appeal citing deficiencies in this assessment. Although Ciena estimates that it could be exposed to possible losses of up to $2.9 million, it has not accrued a liability of such amount as of April 30, 2014. Ciena has not accrued the additional income tax liability because it does not believe that such a loss is more likely than not. Ciena continues to evaluate the likelihood of a probable and reasonably possible loss, if any, related to this assessment. As a result, future increases or decreases to accrued liabilities may be necessary and will be recorded in the period when such amounts are estimable and more likely than not to occur.

Ciena is subject to various tax liabilities arising in the ordinary course of business. Ciena does not expect that the ultimate settlement of these liabilities will have a material effect on its results of operations, financial position or cash flows.

Litigation

On May 29, 2008, Graywire, LLC filed a complaint in the United States District Court for the Northern District of Georgia against Ciena and four other defendants, alleging, among other things, that certain of the parties' products infringe U.S. Patent 6,542,673 (the “'673 Patent”), relating to an identifier system and components for optical assemblies. The complaint seeks injunctive relief and damages. In July 2009, upon request of Ciena and certain other defendants, the U.S. Patent and Trademark Office (“PTO”) granted the defendants' inter partes application for reexamination with respect to certain claims of the '673 Patent, and the district court granted the defendants' motion to stay the case pending reexamination of all of the patents-in-suit. In December 2010, the PTO confirmed the validity of some claims and rejected the validity of other claims of the '673 Patent, to which Ciena and other defendants filed an appeal. On March 16, 2012, the PTO on appeal rejected multiple claims of the '673 Patent, including the two claims on which Ciena is alleged to infringe. Subsequently, the plaintiff requested a reopening of the prosecution of the '673 Patent, which request was denied by the PTO on April 29, 2013. Thereafter, on May 28, 2013, the plaintiff filed an amendment with the PTO in which it canceled the claims of the '673 Patent on which Ciena is alleged to infringe. The case currently remains stayed, and there can be no assurance as to whether or when the stay will be lifted.

 In addition to the matters described above, Ciena is subject to various legal proceedings and claims arising in the ordinary course of business, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. Ciena does not expect that the ultimate costs to resolve these matters will have a material effect on its results of operations, financial position or cash flows.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Some of the statements contained in this quarterly report discuss future events or expectations, contain projections of results of operations or financial condition, changes in the markets for our products and services, or state other “forward-looking” information. Ciena’s “forward-looking” information is based on various factors and was derived using numerous assumptions. In some cases, you can identify these “forward-looking statements” by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of those words and other comparable words. You should be aware that these statements only reflect our current predictions and beliefs. These statements are subject to known and unknown risks, uncertainties and other factors, and actual events or results may differ materially. Important factors that could cause our actual results to be materially different from the forward-looking statements are disclosed throughout this report, particularly in Item 1A “Risk Factors” of Part II of this report below. For a more complete understanding of the risks associated with an investment in Ciena’s securities, you should review these risk factors and the rest of this quarterly report in combination with the more detailed description of our business and management’s discussion and analysis of financial condition in our annual report onForm 10-K, which we filed with the Securities and Exchange Commission ("SEC") on December 20, 2013. Ciena undertakes no obligation to revise or update any forward-looking statements.

Overview

We are a network specialist focused on networking solutions that enable converged, next-generation architectures, optimized to handle the broad array of high-bandwidth communications services relied upon by business and consumer end users. We provide equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks.

Our Converged Packet Optical, Packet Networking, Optical Transport and Software products are used, individually or as part of an integrated, programmable solution, in networks operated by communications service providers, cable operators, governments, enterprises, research and education institutions, content service providers and other network operators across the globe. Our products allow network operators to scale capacity, increase transmission speeds, allocate network traffic and deliver services to end users. Our network solutions also include an integrated software suite that provides network and service management capabilities that unify our product portfolio, facilitating automation and software-defined programmability to enable efficient service delivery. To complement our product portfolio, we offer a broad range of Network Transformation Solutions and related support services that help our customers design, optimize, deploy, manage and maintain their networks. We believe that the close, collaborative partnership with customers enabled by our engagement model and services offering is an important component of our network specialist approach and a significant differentiator for Ciena with our customers.

Rapid proliferation of, and reliance by end users upon, communications services and devices, together with increased mobility and growth in cloud-based services, have fundamentally affected the demands placed upon communications networks and how they are designed. Network operators face a challenging and rapidly changing environment that requires that their network infrastructures be robust enough to address increasing capacity needs and be flexible enough to adapt to new application and service offerings. Network operators are competing to distinguish their service offerings to end users and generate revenue, while managing the costs required to implement and maintain their networks. To address these business, infrastructure and service delivery challenges, we believe network operators need a flexible infrastructure that can be adapted to support a variety of applications and controlled through the use of software.

Our OPⁿ Architecture is designed to meet these challenges by providing increased scalability and programmability, as well as network-level software applications to control and configure the network dynamically. Through this network approach, we seek to enable high-capacity, configurable infrastructures that can adapt to the changing needs of end-users and the applications that they require, while providing flexible interfaces for the integration of computing, storage and network resources. By increasing network flexibility for service delivery, reducing required network elements and enabling increased scale at reduced cost, our solutions optimize networks. At the same time, our approach facilitates introduction of new service offerings, creating business and operational value for our customers. Our OPⁿ Architecture, which underpins our solutions offering and guides our research and development strategy, is described more fully in “Market Opportunity and Strategy” below.

Our quarterly reports on Form 10-Q, annual reports on Form 10-K, and current reports on Form 8-K filed with the SEC are available through the SEC's website at www.sec.gov or free of charge on our website as soon as reasonably practicable after we file these documents. We routinely post the reports above, recent news and announcements, financial results and other information about Ciena that is important to investors in the "Investors" section of our website at www.ciena.com. Investors are

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encouraged to review the “Investors” section of our website because, as with the other disclosure channels that we use, from time to time we may post material information on that site that is not otherwise disseminated by us.

Market Opportunity and Strategy

We believe that the shift that is underway in network architectures to next-generation, converged infrastructures represents significant, long-term opportunities for Ciena. We believe that dynamics, including the proliferation of devices running mobile web applications, the prevalence of video applications, the increase in machine-to-machine connections, and the shift of enterprise and consumer applications to cloud-based or virtualized network environments are representative of the magnitude of changing demands being placed upon network architectures. At the same time, bandwidth requirements and the use and dependence by consumers and enterprises upon a variety of communications applications, services and devices continues to grow. We expect that these drivers will require existing and emerging network operators to invest in converged next-generation network infrastructures that are more automated, open and software programmable.

Our corporate strategy to capitalize on these market dynamics, promote operational efficiency and drive profitable growth of our business includes the following initiatives:

Promotion of our OPⁿ Architecture for Next-Generation Networks. The services and applications running on communications networks require that more of the traffic on these networks be packet-oriented. The traditional approach to this problem has been to add IP routing capability at many points of intersection in the network. As capacity needs grow, this approach becomes unnecessarily complex and costly. We reduce the cost and complexity of growing networks with a programmable infrastructure that brings together the reliability and capacity of optical networking with the flexibility and economics of packet networking technologies. Combining these attributes with network level applications creates an approach we call our OPⁿ Architecture. Our OPⁿ Architecture leverages the convergence of optical and packet networking to enable network scale, applies advanced control plane software for network programmability, and enables cloud-level applications to integrate and optimize network resources — along with computing and storage resources — in a virtualized environment. The software-driven aspects of this architecture become increasingly important as network operators increasingly seek to leverage an open ecosystem of virtualized resources to enable the real-time analytics and network agility required for on-demand, next-generation network architectures. Our OPⁿ Architecture offers network operators scalability, programmability, flexibility and cost-effectiveness, and we see opportunities in offering a portfolio of solutions that facilitate the transition to next-generation networks that are optimized to create new services rapidly and to meet end user demands.

Alignment of Research and Development Investment with Growth Opportunities. We seek to ensure that our product development initiatives are closely aligned with changing dynamics in our markets, network operator and end user demands, and growth opportunities for Ciena. We are investing in our OPⁿ Architecture with current development efforts focused on expanding packet capabilities in our Packet Networking and Converged Packet Optical products for metro and service aggregation applications. We are also focused on optimizing our existing core networking solutions for application in metro networks. Our research and development efforts seek to extend and converge our existing technologies, including our WaveLogic coherent optical processor for 40G and 100G optical transport, and to introduce 400G and greater transmission speeds. In the packet area, we are increasing the scale and capability of our packet offerings and integrating standards-based open control interfaces. In the software area, we are enhancing our network management and planning applications. We are also focusing on initiatives to increase software-defined programmability and control of networks, including through our joint development initiative with Ericsson, and working to develop network-level software applications that configure networks and support new service introduction.

Evolution of our Go-to-Market Model. We seek to evolve our go-to-market sales model, from both coverage and engagement perspectives.

Coverage. Our coverage model is focused on selling into key customer segments, penetrating high-growth geographic markets and addressing additional network applications with our solutions. To complement our existing service provider customers, we intend to continue to seek opportunities to diversify our customer base into key market segments. We are expanding our sales efforts to capture opportunities arising from enterprise migration to cloud-based services, and promoting our reputation with government agencies and research and educational institutions as a trusted network equipment supplier. We are also focused on further penetrating significant Web 2.0 players, including Internet content providers and other emerging network operators who are changing the ways in which information is accessed and shared. To expand the geographic reach of our direct sales resources, and to broaden the role our solutions play in communications networks, we intend to pursue selling initiatives with third parties and foster strategic channel opportunities, including through our service provider customers, systems integrators and value-added resellers. Through our recently announced packet optical distribution relationship with Ericsson we are seeking to expand our geographic reach as well as the

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applications for our products. Our direct and indirect selling efforts are focused on the sale of our solutions into additional applications, including metro aggregation and submarine networks, and in support of cloud-based services, business Ethernet services and mobile backhaul.

Engagement. Our strategy is to leverage our close, collaborative relationships with customers in the design, development, implementation and support of their networks and to promote a close alignment of our solutions with customer network priorities. We believe that this engagement model is a key differentiator for our business and provides us with unique insight into the business and network needs of our customers. We seek to expand our Network Transformation Solutions offering to address the network modernization and service delivery demands of our customers, as well as their desire to derive additional value from their network infrastructures. We believe this services-oriented solutions offering shifts our value proposition beyond the sale of our next-generation communications networking equipment and allows us to play a key role in the design and evolution of our customers' networks to support their strategic business objectives. By understanding our customers’ infrastructure and business needs, and the evolving markets in which they compete, we believe our engagement approach creates additional business and operational value for our customers.

Business optimization to yield operating leverage. We seek to improve the operational efficiencies in our business and gain additional operating leverage. We are focused on the transformation and redesign of certain business processes, systems, and resources. These initiatives include additional investments, re-engineering and automation of certain key business processes, including the engagement of strategic partners or resources to assist with select business functions. In addition, we are focused on optimizing our supply chain, including efforts to reduce our material and overhead costs in an effort to increase efficiency and reduce the cost to produce our product solutions. These initiatives include portfolio and process optimization, reducing our fulfillment, shipping and logistics expense, and identifying ways to drive improved efficiencies in the design and development of our solutions. We seek to leverage these opportunities to promote the profitable growth of our business and drive additional operating leverage.

Competitive Landscape

We continue to encounter a highly competitive marketplace, particularly for our Converged Packet Optical and Packet Networking products. Our sales of Converged Packet Optical solutions reflect an intense and fragmented competitive environment, as we and our competitors introduce and enhance new, high-capacity, high-speed network solutions and aggressively seek to capture market share and maintain incumbency with large service provider customers. Our sales of Packet Networking solutions also face a competitive marketplace as we seek to promote the benefits of our OPⁿ Architecture, as compared to alternative approaches, and secure network operator adoption. We expect the current competitive landscape to remain challenging and dynamic. As networking technologies become more software-driven, and network features and layers continue to converge, our competitive landscape continues to broaden beyond traditional competitors. As a result, we are competing with, and expect to compete increasingly with, additional vendors focused on IP routing, information technology and software.

Securing new opportunities for our Converged Packet Optical and Packet Networking products in this competitive landscape, particularly in international markets, often requires that we agree to aggressive pricing or unfavorable commercial terms. These terms can elongate our revenue recognition or cash collection cycles, add startup costs to initial sales or deployment of our solutions, require financial commitments or performance bonds that place cash resources at risk, and include onerous contractual commitments that place a disproportionate allocation of risk upon the vendor. These terms can adversely affect our results of operations and contribute to fluctuations in our results.

Financial Results

Revenue for the second quarter of fiscal 2014 was $560.1 million, representing a sequential increase of 4.9% from $533.7 million in the first quarter of fiscal 2014. Revenue-related details reflecting sequential changes from the first quarter of fiscal 2014 include:

• Product revenue for the second quarter of fiscal 2014increased by $27.9 million, reflecting increased sales of $23.4 million in Converged Packet Optical and $14.8 million in Packet Networking. These increases were partially offset by decreased sales of $10.5 million in Optical Transport.

• Service revenue for the second quarter of fiscal 2014decreased by $1.5 million.

• Revenue from the United States for the second quarter of fiscal 2014 was $324.0 million, an increase from $317.4 million in the first quarter of fiscal 2014.

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• International revenue for the second quarter of fiscal 2014 was $236.1 million, an increase from $216.3 million in the first quarter of fiscal 2014.

• As a percentage of revenue, international revenue was 42.2% during the second quarter of fiscal 2014, an increase from 40.5% during the first quarter of fiscal 2014.

• For the second quarter of fiscal 2014, onecustomer accounted for 21.5% of total revenue. This compares to one customer that accounted for 18.8% of total revenue in the first quarter of fiscal 2014.

Gross margin for the second quarter of fiscal 2014 was 42.4%, an increase from 42.3% in the first quarter of fiscal 2014.

Operating expense was $230.5 million for the second quarter of fiscal 2014, an increase from $222.5 million in the first quarter of fiscal 2014. Second quarter fiscal 2014 operating expense reflects increases of $5.3 million in selling and marketing expense, $2.0 million in research and development expense and $1.8 million in general and administrative expense. These increases were partially offset by a decrease of $1.0 million in amortization expense for intangibles.

Reflecting the revenue and margin improvement above, income from operations for the second quarter of fiscal 2014 was $7.2 million, compared to income from operations of $3.4 million during the first quarter of fiscal 2014. Our net loss for the second quarter of fiscal 2014 was $10.2 million, or $0.10 per share. This compares to a net loss of $15.9 million or $0.15 per share, for the first quarter of fiscal 2014.

We generated cash from operations of $2.0 million during the second quarter of fiscal 2014, consisting of $49.5 million in cash provided by net losses adjusted for non-cash charges, offset by a $47.5 millionuse of cash related to changes in working capital. This compares with $37.2 million of cash used by operations during the first quarter of fiscal 2014, consisting of $41.3 million in cash provided by net losses adjusted for non-cash charges offset by a $78.5 millionuse of cash related to changes in working capital.

As of April 30, 2014, we had $325.1 million in cash and cash equivalents, $90.1 million of short-term investments in U.S. treasury securities and commercial paper, and $15.0 million of long-term investments in U.S. treasury securities. This compares to $356.5 million in cash and cash equivalents and $100.0 million of short-term investments in U.S. treasury securities, at April 30, 2013, and $346.5 million in cash and cash equivalents, $125.0 million of short-term investments in U.S. treasury securities and commercial paper, and $15.0 million of long-term investments in U.S. treasury securities at October 31, 2013.

As of April 30, 2014, we had 4,998 employees, an increase from 4,754 at October 31, 2013 and an increase from 4,546 at April 30, 2013.

Consolidated Results of Operations

Operating Segments

Ciena’s internal organizational structure and the management of its business are grouped into the following operating segments:

• Converged Packet Optical — includes networking solutions optimized for the convergence of coherent optical transport, OTN switching and packet switching. These platforms enable automated packet-optical infrastructures that create and efficiently allocate high-capacity bandwidth for the delivery of a wide variety of enterprise and consumer-oriented network services. Products in this segment include the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, which feature Ciena's WaveLogic coherent optical processors. Products also include Ciena's family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. These products include multiservice, multi-protocol switching systems that consolidate the functionality of an add/drop multiplexer, digital cross-connect and packet switch into a single, high-capacity intelligent switching system. These products address both the core and metro segments of communications networks and support key managed services, Ethernet/TDM Private Line, Triple Play and IP services. This segment also includes sales of operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Packet Networking — principally includes Ciena's 3000 family of service delivery switches and service aggregation switches, the 5000 series of service aggregation switches, and its Ethernet packet configuration for the 5410 Service Aggregation Switch. These products support the access and aggregation tiers of communications networks and have

30

principally been deployed to support wireless backhaul infrastructures and business data services. Employing sophisticated, carrier-grade Ethernet switching technology, these products deliver quality of service capabilities, virtual local area networking and switching functions, and carrier-grade operations, administration, and maintenance features. This segment includes stand-alone broadband products that transition voice networks to support Internet-based (IP) telephony, video services and DSL. This segment also includes sales of operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Optical Transport — includes optical transport solutions that add capacity to core, regional and metro networks and enable cost-effective and efficient transport of voice, video and data traffic at high transmission speeds. Ciena's principal products in this segment include the 4200 Advanced Services Platform, Corestream® Agility Optical Transport System, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL), and 6100 Multiservice Optical Platform. This segment includes sales from SONET/SDH, transport and data networking products, as well as certain enterprise-oriented transport solutions that support storage and LAN extension, interconnection of data centers, and virtual private networks. This segment also includes operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Software and Services — includes Ciena's network software suite, including the OneControl Unified Management System, an integrated network and service management software designed to automate and simplify network management, operation and service delivery. These software solutions can track individual services across multiple product suites, facilitating planned network maintenance, outage detection and identification of customers or services affected by network performance. This segment includes the ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and network level applications. This segment includes a broad range of consulting, network design and support services from Ciena's Network Transformation Solutions offering. This segment also includes installation and deployment, maintenance support and training activities. Except for revenue from the software portion of this segment, which is included in product revenue, revenue from this segment is included in services revenue on the Condensed Consolidated Statement of Operations.

Quarter ended April 30, 2013 compared to the quarter ended April 30, 2014

Revenue

The table below (in thousands, except percentage data) sets forth the changes in our operating segment revenue for the periods indicated:

	Quarter Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)			%**
Revenue:
Converged Packet Optical	$	294,325	57.9	$	356,840	63.7	$	62,515		21.2
Packet Networking	54,190		10.7	66,526		11.9	12,336			22.8
Optical Transport	57,371		11.3	29,616		5.3	(27,755		)	(48.4	)
Software and Services	101,826		20.1	107,079		19.1	5,253			5.2
Consolidated revenue	$	507,712	100.0	$	560,061	100.0	$	52,349		10.3

_____________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

• Converged Packet Optical revenueincreased, reflecting a $64.4 million increase in sales of our 6500 Packet-Optical Platform, largely driven by service provider demand for high-capacity, optical transport for coherent 40G and 100G network infrastructures. In addition, sales of the OTN configuration for the 5410 Reconfigurable Switching System increased by $5.7 million. These increases were slightly offset by decreases of $4.7 million in sales of our CoreDirector® Multiservice Optical Switches and $2.9 million in sales of our 5430 Reconfigurable Switching System. The strong performance of this segment, particularly as compared to the expected declines in Optical Transport segment revenue, reflects the preference of network operators to adopt next-generation architectures that enable the

31

convergence of high-capacity, coherent optical transport with integrated OTN switching and control plane functionality.

• Packet Networking revenueincreased, reflecting a $14.6 million increase in sales of our 3000 and 5000 families of service delivery and aggregation switches. This increase was partially offset by a $1.8 million decrease in sales of our 5410 Service Aggregation Switch. Segment revenue benefited from the expansion of Ethernet business services by our North American service provider customers and sales of service delivery and aggregation products in support of their packet-related network initiatives.

• Optical Transport revenuedecreased, reflecting a $10.1 million decrease of our 5100/5200 Advanced Services Platform, a $10.9 million decrease in sales of other stand-alone transport products and a $6.7 million decrease in sales of our 4200 Advanced Services Platform. Revenue for our Optical Transport segment, which currently consists principally of stand-alone WDM and SONET/SDH-based transport platforms, has experienced meaningful declines in revenue in recent years. We expect this to continue, reflecting network operators' transition toward next-generation converged network architectures as described above.

• Software and Services revenueincreased, reflecting increases of $2.5 million in maintenance and support services revenue and $1.8 million in installation and deployment services revenue.

Revenue from sales to customers outside of the United States is reflected as International in the geographic distribution of revenue below. The table below (in thousands, except percentage data) sets forth the changes in geographic distribution of revenue for the periods indicated:

	Quarter Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)		%**
United States	$	287,572	56.6	$	323,927	57.8	$	36,355	12.6
International	220,140		43.4	236,134		42.2	15,994		7.3
Total	$	507,712	100.0	$	560,061	100.0	$	52,349	10.3

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

• United States revenue reflects increases of $32.7 million in Converged Packet Optical sales, $12.1 million in Packet Networking sales and $6.5 million in Software and Services revenue. These increases were partially offset by a $15.0 million decrease in Optical Transport sales. Increased revenues reflect adoption by network operators in the United States of converged network architectures that align well with our OPⁿ Architecture and solutions offering.

• International revenue reflects increases of $29.8 million in Converged Packet Optical sales, partially offset by decreases of $12.8 million in Optical Transport sales and $1.3 million in Software and Services revenue.

A sizable portion of our revenue continues to come from sales to a small number of service providers. As a result, our financial results are significantly affected by, and can fluctuate depending upon, spending levels and the business opportunities and challenges encountered by our largest service provider customers. For the second quarter of fiscal 2014, onecustomer accounted for 21.5% of total revenue. This compares to twocustomers that together accounted for 31.3% of total revenue in the second quarter of fiscal 2013.

Cost of Goods Sold and Gross Profit

Product cost of goods sold consists primarily of amounts paid to third-party contract manufacturers, component costs, employee-related costs and overhead, shipping and logistics costs associated with manufacturing-related operations, warranty and other contractual obligations, royalties, license fees, amortization of intangible assets, cost of excess and obsolete inventory and, when applicable, estimated losses on committed customer contracts.

Services cost of goods sold consists primarily of direct and third-party costs, including employee-related costs, associated with our provision of services including installation, deployment, maintenance support, consulting and training activities and, when applicable, estimated losses on committed customer contracts.

While we have experienced recent periods in which our gross profit as a percentage of revenue, or “gross margin,” has been more consistent, it remains susceptible to fluctuation in any quarter due to a number of factors impacting our business.

32

Gross margin can be adversely affected by the level of pricing pressure and competition that we encounter in the market, particularly in our efforts to compete to obtain business with new customers or to maintain business with existing customers. In an effort to penetrate additional markets, secure new business or capture market share, we may agree to pricing or other unfavorable commercial terms that result in lower or negative gross margins on a particular order or group of orders, particularly associated with initial sales or deployment projects. Similarly, to maintain incumbency with key customers for existing and future business opportunities, we may be required to offer discounted pricing, provide commitments with respect to future technology development, or offer less favorable commercial terms as compared to our historical business arrangements with these customers. Some of our large existing customers are pursuing purchasing strategies or adopting procurement approaches intended to drive further pricing reductions, seek additional commercial concessions and consolidate their number of direct suppliers of networking technology. The impact of significant new wins or commercial concessions to significant customers can adversely affect our gross margin during the relevant periods and result in fluctuation in our results of operations.

Our product gross margin can also vary significantly depending upon the mix and concentration of revenue by segment, product line within a particular segment, geography and customers. Within our Converged Packet Optical segment, gross margin can be affected by our mix of lower margin "commons" equipment sales and higher margin channel cards and software content. We also expect that gross margins will be subject to fluctuation based on our introduction of new products, changes in expense for excess and obsolete inventory and warranty obligations, as well as our degree of success in driving product cost reductions and other effort to optimize our operations. Service gross margin can be affected by customer and geographic mix, and the mix between lower margin deployment services as compared to maintenance and other service offerings. These market dynamics and factors may adversely affect our gross margins and results of operations in certain periods.

The tables below (in thousands, except percentage data) set forth the changes in revenue, cost of goods sold and gross profit for the periods indicated:

	Quarter Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)		%**
Total revenue	$	507,712	100.0	$	560,061	100.0	$	52,349	10.3
Total cost of goods sold	298,199		58.7	322,370		57.6	24,171		8.1
Gross profit	$	209,513	41.3	$	237,691	42.4	$	28,178	13.4

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

	Quarter Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)		%**
Product revenue	$	413,217	100.0	$	460,821	100.0	$	47,604	11.5
Product cost of goods sold	239,441		57.9	257,632		55.9	18,191		7.6
Product gross profit	$	173,776	42.1	$	203,189	44.1	$	29,413	16.9

_____________________________________

*    Denotes % of product revenue

**    Denotes % change from 2013 to 2014

	Quarter Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)			%**
Service revenue	$	94,495	100.0	$	99,240	100.0	$	4,745		5.0
Service cost of goods sold	58,758		62.2	64,738		65.2	5,980			10.2
Service gross profit	$	35,737	37.8	$	34,502	34.8	$	(1,235	)	(3.5	)

_____________________________________

*    Denotes % of services revenue

**    Denotes % change from 2013 to 2014

33

• Gross profit as a percentage of revenueincreased as a result of the factors described below.

• Gross profit on products as a percentage of product revenueincreased, primarily due to a greater mix of higher margin channel card revenue within our Converged Packet Optical segment, lower provisions for warranty expense and greater leverage from efforts to streamline and optimize our supply chain activities. These increases were partially offset by higher inventory excess and obsolescence costs.

• Gross profit on services as a percentage of services revenuedecreased, primarily due to higher shipping and warehousing costs for our maintenance services. These higher costs are largely due to the expansion of our international activities.

Operating Expense

We expect operating expense to increase in fiscal 2014 from the level reported for fiscal 2013 to support the growth of our business and fund our research and development initiatives. However, we expect fiscal 2014 operating expense as a percentage of revenue to decline as compared to fiscal 2013. Operating expense consists of the component elements described below.

Research and development expense primarily consists of salaries and related employee expense (including share-based compensation expense), prototype costs relating to design, development, and testing of our products, depreciation expense and third-party consulting costs.

Selling and marketing expense primarily consists of salaries, commissions and related employee expense (including share-based compensation expense), and sales and marketing support expense, including travel, demonstration units, trade show expense and third-party consulting costs.

General and administrative expense primarily consists of salaries and related employee expense (including share-based compensation expense), and costs for third-party consulting and other services.

Amortization of intangible assets primarily consists of the amortization of purchased technology and customer relationships from our acquisitions.

Restructuring costs primarily reflect actions Ciena has taken to better align its workforce, facilities and operating costs with perceived market opportunities, business strategies and changes in market and business conditions.

The table below (in thousands, except percentage data) sets forth the changes in operating expense for the periods indicated:

	Quarter Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)			%**
Research and development	$	100,787	19.9	$	103,492	18.5	$	2,705		2.7
Selling and marketing	74,475		14.6	83,662		14.9	9,187			12.3
General and administrative	30,883		6.1	31,882		5.7	999			3.2
Amortization of intangible assets	12,439		2.4	11,493		2.1	(946		)	(7.6	)
Restructuring costs	1,509		0.3	—		0.0	(1,509		)	(100.0	)
Total operating expenses	$	220,093	43.3	$	230,529	41.2	$	10,436		4.7

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

• Research and development expensebenefited by $5.0 million as a result of foreign exchange rates, primarily due to strengthening of the U.S. dollar in relation to the Canadian Dollar. The $2.7 millionincrease in research and development expense consisted of a $2.2 million increase in employee compensation and related costs and a $1.7 million increase in professional services expense. These increases were partially offset by a $1.2 million decrease in prototype expense. Our prioritization of expense reflects the research and development strategy described in "Market Opportunity and Strategy" above.

34

• Selling and marketing expenseincreased by $9.2 million, primarily reflecting increases of $7.9 million in employee compensation and related costs and $1.6 million in travel and related costs. These increases were partially offset by a $1.0 million decrease in customer demonstration equipment expense.

• General and administrative expenseincreased by $1.0 million, reflecting a $2.0 million patent litigation settlement, partially offset by a $1.0 million decrease in employee compensation and related costs.

• Amortization of intangible assetsdecreased due to certain intangible assets having reached the end of their economic lives.

• Restructuring costs for fiscal 2013 primarily reflect certain severance and related expense associated with

headcount reductions and restructuring activities to align our workforce and resources with market opportunities and

research and development initiatives. Restructuring costs for fiscal 2013 also include the consolidation of certain facilities located within Maryland associated with the transition of our headquarters facility.

Other items

The table below (in thousands, except percentage data) sets forth the changes in other items for the periods indicated:

	Quarter Ended April 30,										Increase
	2013			%*		2014			%*		(decrease)			%**
Interest and other income (loss), net	$	(2,716	)	(0.5	)	$	(1,905	)	(0.3	)	$	811		(29.9	)
Interest expense	$	11,392		2.2		$	11,020		2.0		$	(372	)	(3.3	)
Provision for income taxes	$	2,391		0.5		$	4,395		0.8		$	2,004		83.8

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

• Interest and other income (loss), net reflects a $2.4 million gain in foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity, partially offset by a $1.6 million non-cash loss related to the change in fair value of the embedded redemption feature associated with our 4.0% convertible senior notes due March 15, 2015 (the "2015 Notes").

• Interest expense remained relatively unchanged.

• Provision for income taxes increased primarily due to foreign tax expense, which is largely a result of higher income from our Brazilian operations.

Six months ended April 30, 2013 compared to the six months ended April 30, 2014

Revenue

The table below (in thousands, except percentage data) sets forth the changes in our operating segment revenue for the periods indicated:

	Six Months Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)			%**
Revenue:
Converged Packet Optical	$	534,285	55.6	$	690,241	63.1	$	155,956		29.2
Packet Networking	100,027		10.4	118,235		10.8	18,208			18.2
Optical Transport	114,968		12.0	69,713		6.4	(45,255		)	(39.4	)
Software and Services	211,525		22.0	215,575		19.7	4,050			1.9
Consolidated revenue	$	960,805	100.0	$	1,093,764	100.0	$	132,959		13.8

_____________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

35

• Converged Packet Optical revenueincreased significantly, reflecting a $132.6 million increase in sales of our 6500 Packet-Optical Platform, largely driven by service provider demand for high-capacity, optical transport for coherent 40G and 100G network infrastructures. In addition, sales of our 5430 reconfigurable switching system and the OTN configuration for the 5410 Reconfigurable Switching System increased by $24.1 million and $3.7 million respectively. These increases were partially offset by a $4.4 million decrease in sales of our CoreDirector® Multiservice Optical Switches. The strong performance of this segment, particularly as compared to the expected declines in Optical Transport segment revenue, reflects the preference of network operators to adopt next-generation architectures that enable the convergence of high-capacity, coherent optical transport with integrated OTN switching and control plane functionality.

• Packet Networking revenueincreased, reflecting an increase of $25.5 million in sales of our 3000 and 5000 families of service delivery and aggregation switches. This increase was partially offset by decreases of $5.8 million in sales of our 5410 Service Aggregation Switch and $1.1 million in sales of our older, stand-alone broadband products. Segment revenue benefited from the expansion of Ethernet business services by our North American service provider customers and sales of service delivery and aggregation products in support of their related network initiatives.

• Optical Transport revenuedecreased, reflecting sales decreases of $14.5 million in our 4200 Advanced Services Platform, $20.8 million in other stand-alone transport products and $10.0 million of 5100/5200 Advanced Services Platform. Revenue for our Optical Transport segment, which currently consists principally of stand-alone WDM and SONET/SDH-based transport platforms, has experienced meaningful declines in annual revenue in recent years, reflecting network operators' transition toward next-generation converged network architectures as described above.

• Software and Services revenueincreased, reflecting increases of $2.8 million for installation and deployment services revenue and $2.8 million for maintenance and support services revenue. These increases were partially offset by a $1.4 million decrease in software sales.

Revenue from sales to customers outside of the United States is reflected as International in the geographic distribution of revenue below. The table below (in thousands, except percentage data) sets forth the changes in geographic distribution of revenue for the periods indicated:

	Six Months Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)		%**
United States	$	551,807	57.4	$	641,377	58.6	$	89,570	16.2
International	408,998		42.6	452,387		41.4	43,389		10.6
Total	$	960,805	100.0	$	1,093,764	100.0	$	132,959	13.8

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

• United States revenue reflects increases of $92.9 million in Converged Packet Optical sales, $17.9 million in Packet Networking sales and $9.5 million in Services and Software sales. In particular, during the first half of fiscal 2014, we benefited from the spending patterns and decisions of our largest service provider customers as they adopted converged, next generation network architectures that align well with our OPⁿ Architecture and solutions offering. These increases were partially offset by a $30.7 million decrease in Optical Transport sales.

• International revenue reflects an increase of $63.1 million in Converged Packet Optical sales. This increase was partially offset by decreases of $14.6 million in Optical Transport sales and $5.5 million in Software and Services revenue.

Cost of Goods Sold and Gross Profit

The tables below (in thousands, except percentage data) set forth the changes in revenue, cost of goods sold and gross profit for the periods indicated:

36

	Six Months Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)		%**
Total revenue	$	960,805	100.0	$	1,093,764	100.0	$	132,959	13.8
Total cost of goods sold	555,497		57.8	630,222		57.6	74,725		13.5
Gross profit	$	405,308	42.2	$	463,542	42.4	$	58,234	14.4

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

	Six Months Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)		%**
Product revenue	$	766,274	100.0	$	893,762	100.0	$	127,488	16.6
Product cost of goods sold	435,962		56.9	502,848		56.3	66,886		15.3
Product gross profit	$	330,312	43.1	$	390,914	43.7	$	60,602	18.3

_____________________________________

*    Denotes % of product revenue

**    Denotes % change from 2013 to 2014

	Six Months Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)			%**
Service revenue	$	194,531	100.0	$	200,002	100.0	$	5,471		2.8
Service cost of goods sold	119,535		61.4	127,374		63.7	7,839			6.6
Service gross profit	$	74,996	38.6	$	72,628	36.3	$	(2,368	)	(3.2	)

_____________________________________

*    Denotes % of services revenue

**    Denotes % change from 2013 to 2014

• Gross profit as a percentage of revenueincreased as a result of the factors described below.

• Gross profit on products as a percentage of product revenueincreased primarily due to improved mix of higher-margin packet platforms with software content within our Packet Networking and Converged Packet Optical segments, and greater leverage from efforts to streamline and optimize our supply chain activities.

• Gross profit on services as a percentage of services revenuedecreased primarily due to higher spares usage costs in support of our maintenance contracts.

Operating Expense

The table below (in thousands, except percentage data) sets forth the changes in operating expense for the periods indicated:

	Six Months Ended April 30,						Increase
	2013		%*	2014		%*	(decrease)			%**
Research and development	$	189,912	19.8	$	204,989	18.7	$	15,077		7.9
Selling and marketing	141,063		14.7	162,010		14.8	$	20,947		14.8
General and administrative	59,091		6.2	61,979		5.7	$	2,888		4.9
Amortization of intangible assets	24,892		2.6	23,932		2.2	(960		)	(3.9	)
Restructuring costs	6,539		0.7	115		—	(6,424		)	(98.2	)
Total operating expenses	$	421,497	44.0	$	453,025	41.4	$	31,528		7.5

_____________________________________

*    Denotes % of total revenue

37

**    Denotes % change from 2013 to 2014

• Research and development expense benefited by $9.6 million, as a result of foreign exchange rates, primarily due to strengthening of the U.S. dollar in relation to the Canadian Dollar. The increase of $15.1 million primarily reflects increases of $6.8 million in professional services expense, $4.3 million in prototype expense and $3.8 million in employee compensation and related costs.

• Selling and marketing expenseincreased$20.9 million, primarily reflecting increases of $18.9 million in employee compensation and related costs and $3.0 million of travel and related costs. These increases were partially offset by a $1.0 million decrease in customer demonstration equipment expense.

• General and administrative expenseincreased$2.9 million, reflecting a $2.0 million patent litigation settlement and a $1.0 million increase in employee compensation and related costs.

• Amortization of intangible assetsdecreased due to certain intangible assets having reached the end of their economic lives.

• Restructuring costs primarily reflect certain severance and related expense associated with headcount reductions and restructuring activities to align our workforce and resources with market opportunities and research and development initiatives. Restructuring costs for fiscal 2013 also include the consolidation of certain facilities located within Maryland associated with the transition of our headquarters facility.

Other items

The table below (in thousands, except percentage data) sets forth the changes in other items for the periods indicated:

	Six Months Ended April 30,										Increase
	2013			%*		2014			%*		(decrease)			%**
Interest and other income (loss), net	$	(2,853	)	(0.3	)	$	(7,903	)	(0.7	)	$	(5,050	)	177.0
Interest expense	$	22,124		2.3		$	22,048		2.0		$	(76	)	(0.3	)
Loss on extinguishment of debt	$	28,630		3.0		$	—		0.0		$	(28,630	)	(100.0	)
Provision for income taxes	$	4,607		0.5		$	6,660		0.6		$	2,053		44.6

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2013 to 2014

• Interest and other income (loss), net reflects a $3.0 million non-cash loss related to the change in fair value of the embedded redemption feature associated with our 2015 Notes and a $1.8 million loss related to foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity.

• Interest expense remained relatively unchanged.

• Loss on extinguishment of debt for fiscal 2013 reflects a non-cash loss of $28.6 million relating to the exchange transactions during the first quarter of fiscal 2013. Upon issuance, the 4.0% convertible senior notes due December 15, 2020 (the "2020 Notes") were recorded at a fair value of $213.6 million. The exchange transactions resulted in the retirement of outstanding 2015 Notes with a carrying value of $187.9 million and the write-off of unamortized debt issuance costs of $2.3 million and $0.6 million relating to the redemption feature on the 2015 Notes, which was accounted for as a separate embedded derivative.

• Provision for income taxes increased primarily due to foreign tax expense, which is largely a result of higher income from our Brazilian operations.

Segment Profit

The table below (in thousands, except percentage data) sets forth the changes in our segment profit for the respective periods:

38

	Quarter Ended April 30,
	2013		2014		Increase (decrease)			%*
Segment profit:
Converged Packet Optical	$	57,528	$	96,581	$	39,053		67.9
Packet Networking	$	2,556	$	8,196	$	5,640		220.7
Optical Transport	$	21,413	$	4,709	$	(16,704	)	(78.0	)
Software and Services	$	27,229	$	24,713	$	(2,516	)	(9.2	)

_____________________________________

*    Denotes % change from 2013 to 2014

• Converged Packet Optical segment profitincreased, primarily due to increased sales volume and improved gross margin, partially offset by increased research and development expense. The increased sales volume is largely driven by service provider demand for convergence of high-capacity, coherent 40G and 100G network infrastructures with integrated OTN switching and control plane functionality. The improved gross margin is primarily due to sales reflecting a greater mix of higher-margin packet platforms with software content within the segment.

• Packet Networking segment profitincreased slightly due to increased sales volume and improved gross margin, partially offset by increased research and development expense. Packet Networking revenue benefited from the expansion of Ethernet business services by our North American service provider customers and sales of service delivery and aggregation products in support of their related network initiatives. Gross margin improved due to sales reflecting a greater mix of higher-margin platforms with software content within the segment.

• Optical Transport segment profitdecreased, primarily due to reduced sales volume and lower gross margin. The decrease in gross margin is primarily due to an increase in obsolete and excess inventory expense for the discontinuance of certain parts and components used in the manufacture of our Optical Transport products, including our Corestream® Agility Optical Transport platform. Revenue for our Optical Transport segment, which currently consists principally of stand-alone WDM and SONET/SDH-based transport platforms, has experienced meaningful declines in annual revenue in recent years, reflecting network operators' transition toward next-generation network architectures as described above.

• Software and Services segment profitdecreased primarily due to higher shipping and warehousing costs for our maintenance services. These higher costs are largely due to the expansion of our international activities.

The table below (in thousands, except percentage data) sets forth the changes in our segment profit for the respective periods:

	Six Months Ended April 30,
	2013		2014		Increase (decrease)			%*
Segment profit:
Converged Packet Optical	$	104,646	$	175,279	$	70,633		67.5
Packet Networking	$	7,639	$	8,581	$	942		12.3
Optical Transport	$	42,000	$	20,359	$	(21,641	)	(51.5	)
Software and Services	$	61,111	$	54,334	$	(6,777	)	(11.1	)

_____________________________________

*    Denotes % change from 2013 to 2014

• Converged Packet Optical segment profitincreased, primarily due to increased sales volume and improved gross margin, partially offset by increased research and development expense. The increased sales volume is largely driven by service provider demand for convergence of high-capacity, coherent 40G and 100G network infrastructures with integrated OTN switching and control plane functionality. The improved gross margin is primarily due to sales reflecting a greater mix of higher-margin packet platforms with software content within the segment.

• Packet Networking segment profitincreased slightly due to increased sales volume and improved gross margin, partially offset by increased research and development expense. Packet Networking revenue benefited from the

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expansion of Ethernet business services by our North American service provider customers and sales of service delivery and aggregation products in support of their related network initiatives. Gross margin improved due to sales reflecting a greater mix of higher-margin platforms with software content within the segment.

• Optical Transport segment profitdecreased, primarily due to reduced sales volume and lower gross margin, partially offset by lower research and development expense. The decrease in gross margin is primarily due to an increase in obsolete and excess inventory expense for the discontinuance of certain parts and components used in the manufacture of our Optical Transport products, including our Corestream® Agility Optical Transport platform. Revenue for our Optical Transport segment, which currently consists principally of stand-alone WDM and SONET/SDH-based transport platforms, has experienced meaningful declines in annual revenue in recent years, reflecting network operators' transition toward next-generation network architectures as described above.

• Software and Services segment profitdecreased, primarily due to due to higher shipping and warehousing costs for our maintenance services. These higher costs are largely due the expansion of our international activities.

Liquidity and Capital Resources

At April 30, 2014, our principal sources of liquidity were cash and cash equivalents, short-term investments and long-term investments in marketable debt securities, representing U.S. treasuries and commercial paper. The following table sets forth changes in our cash and cash equivalents and investments in marketable debt securities (in thousands):

	October 31, 2013		April 30, 2014		Increase (decrease)
Cash and cash equivalents	$	346,487	$	325,083	$	(21,404	)
Short-term investments in marketable debt securities	124,979		90,049		(34,930		)
Long-term investments in marketable debt securities	15,031		15,042		11
Total cash and cash equivalents and investments in marketable debt securities	$	486,497	$	430,174	$	(56,323	)

The change in total cash and cash equivalents and investments in marketable debt securities during the first six months of fiscal 2014 was primarily related to the following:

• $35.2 million cash used in operations, consisting of $90.8 millionprovided by net loss (adjusted for non-cash charges) and $126.0 millionused in working capital;

• $26.5 million used for purchases of equipment, furniture, and fixtures and intellectual property;

• $4.0 million used in settlement of foreign currency forward contracts, net;

• $1.5 million used in relation to payment of capital lease obligations; and

• $9.0 million provided by stock issuances under our employee stock purchase plan and exercise of stock options.

As of April 30, 2014, letters of credit totaling $58.7 million were collateralized by our senior secured asset-based revolving credit facility (the “Credit Facility”). There were no borrowings outstanding under the Credit Facility as of April 30, 2014. See "Asset-Backed Credit Facility" below for additional information.

We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating plans and may consider capital raising and other market opportunities that may be available to us. Based on past performance and current expectations, we believe that our cash, cash equivalents, investments and other sources of liquidity, including our Credit Facility, will satisfy the working capital needs, capital expenditures, the repayment of our outstanding 4.0% convertible senior notes due March 15, 2015 and other liquidity requirements associated with our operations through at least the next 12 months.

The following sections set forth the components of our $35.2 million of cash used in by operating activities during the first six months of fiscal 2014:

Net loss (adjusted for non-cash charges)

The following table sets forth (in thousands) our net loss (adjusted for non-cash charges) during the period:

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	Six months ended
	April 30, 2014
Net loss	$	(26,094	)
Adjustments for non-cash charges:
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements	27,143
Share-based compensation costs	23,443
Amortization of intangible assets	30,712
Provision for inventory excess and obsolescence	12,972
Provision for warranty	12,424
Other	10,164
Net loss (adjusted for non-cash charges)	$	90,764

Working Capital

Accounts Receivable, Net

Cash used by an increase in accounts receivable during the first six months of fiscal 2014, net of a $1.2 million provision for doubtful accounts, was $27.6 million. This reflects both increases in our revenues and days sales outstanding (DSOs). Our DSOs increased from 79 days for the first six months of fiscal 2013 to 85 days for the first six months of fiscal 2014. The increase in DSOs primarily reflects growth in certain new international customers whose contracts have longer payment terms.

The following table sets forth (in thousands) changes to our accounts receivable, net of allowance for doubtful accounts, from the end of fiscal 2013 through the end of the second quarter of fiscal 2014:

	October 31, 2013		April 30, 2014		Increase (decrease)
Accounts receivable, net	$	488,578	$	514,973	$	26,395

Inventory

Cash used by an increase in inventory during the first six months of fiscal 2014 was $57.8 million. The increase in inventory reflects our decision to carry more finished goods inventory for our Converged Packet Optical products to reduce our lead times for shipments to customers and higher deferred cost of goods sold for shipments awaiting acceptance. Our inventory turns decreased from 3.5 turns during the first six months of fiscal 2013 to 3.4 turns during the first six months of fiscal 2014. During the first six months of fiscal 2014 the net increase in inventory was $44.8 million which reflects a $13.0 million non-cash provision taken for excess and obsolescence. The following table sets forth (in thousands) changes to the components of our inventory from the end of fiscal 2013 through the end of the second quarter of fiscal 2014:

	October 31, 2013			April 30, 2014			Increase (decrease)
Raw materials	$	53,274		$	56,689		$	3,415
Work-in-process	7,773			7,919			146
Finished goods	153,855			181,020			27,165
Deferred cost of goods sold	75,764			95,783			20,019
Gross inventory	290,666			341,411			50,745
Provision for inventory excess and obsolescence	(41,563		)	(47,459		)	(5,896		)
Inventory	$	249,103		$	293,952		$	44,849

Prepaid expense and other

Cash used by an increase in prepaid expense and other during the first six months of fiscal 2014 was $19.1 million primarily related to higher product demonstration equipment, other non-trade receivables and prepaid value added tax.

Accounts payable, accruals and other obligations

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Utilization of cash resources for accounts payable, accruals and other obligations during the first six months of fiscal 2014 was $51.6 million, reflecting, among other things, the timing of the annual payment under our cash incentive compensation plan to employees with respect to amounts earned for fiscal 2013. Changes in accrued liabilities reflect a $12.4 million non-cash provision related to warranties. Changes in accounts payable reflect a decrease of $1.4 million for investing activities related to equipment purchases.

The following table sets forth (in thousands) changes in our accounts payable, accruals and other obligations from the end of fiscal 2013 through the end of the second quarter of fiscal 2014:

	October 31, 2013		April 30, 2014		Increase (decrease)
Accounts payable	$	254,849	$	229,498	$	(25,351	)
Accrued liabilities	271,656		254,436		(17,220		)
Other long-term obligations	34,753		35,789		1,036
Accounts payable, accruals and other obligations	$	561,258	$	519,723	$	(41,535	)

Interest Paid on Convertible Notes and Credit Facility

Interest on our outstanding 4.0% convertible senior notes, due March 15, 2015, is payable on March 15 and September 15 of each year. We paid $3.8 million in interest on these convertible notes during the first six months of fiscal 2014.

Interest on our outstanding 0.875% convertible senior notes, due June 15, 2017, is payable on June 15 and December 15 of each year. We paid $2.2 million in interest on these convertible notes during the first six months of fiscal 2014.

Interest on our outstanding 3.75% convertible senior notes, due October 15, 2018, is payable on April 15 and October 15 of each year. We paid $6.6 million in interest on these convertible notes during the first six months of fiscal 2014.

Interest on our outstanding 4.0% convertible senior notes, due December 15, 2020, is payable on June 15 and December 15 of each year. We paid $3.8 million in interest on these convertible notes during the first six months of fiscal 2014.

During the first six months of fiscal 2014, we utilized the Credit Facility to collateralize certain standby letters of credit. We paid $0.8 million in commitment fees, interest expense and other administrative charges relating to the Credit Facility during the first six months of fiscal 2014.

Deferred revenue

Deferred revenue increased by $30.1 million during the first six months of fiscal 2014. Product deferred revenue represents either payments received in advance of shipment or payments received after shipment but before revenue recognition. Services deferred revenue is related to payment for service contracts for which revenue will be recognized over the contract term. The following table reflects (in thousands) the balance of deferred revenue and the change in this balance from the end of fiscal 2013 through the first six months of fiscal 2014:

	October 31, 2013		April 30, 2014		Increase (decrease)
Products	$	36,671	$	64,326	$	27,655
Services	75,499		77,967		2,468
Total deferred revenue	$	112,170	$	142,293	$	30,123

Asset-Backed Credit Facility

During fiscal 2012, we entered into a $150.0 million senior secured asset-based revolving credit facility (the “Credit Facility”). The Credit Facility matures on August 13, 2015, provided that it will mature early on December 15, 2014, if any of Ciena's 2015 Notes are then outstanding. Ciena principally uses and expects to continue to use the Credit Facility to support the issuance of letters of credit that arise in the ordinary course of its business and thereby to reduce its use of cash required to

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collateralize these instruments. As of April 30, 2014, letters of credit totaling $58.7 million were collateralized by the Credit Facility. There were no borrowings outstanding under the Credit Facility as of April 30, 2014.

Contractual Obligations

The following is a summary of our future minimum payments under contractual obligations as of April 30, 2014 (in thousands):

	Total		Less than one year		One to three years		Three to five years		Thereafter
Principal due at maturity on convertible notes (1)	$	1,254,627	$	187,500	$	—	$	850,000	$	217,127
Interest due on convertible notes	134,375		32,500		50,000		36,875		15,000
Operating leases (2)	156,672		32,159		53,904		22,699		47,910
Purchase obligations (3)	258,617		258,617		—		—		—
Capital leases	3,663		2,554		1,081		28		—
Other obligations	6,190		3,042		3,140		8		—
Total (4)	$	1,814,144	$	516,372	$	108,125	$	909,610	$	280,037

_____________________________________

(1) Includes the accretion of the principal amount on the 2020 Notes payable at maturity at a rate of 1.85% per year compounded semi-annually, commencing December 27, 2012.

(2) Does not include variable insurance, taxes, maintenance and other costs required by the applicable operating lease. These costs are not expected to have a material future impact.

(3) Purchase obligations relate to purchase order commitments to our contract manufacturers and component suppliers for inventory. In certain instances, we are permitted to cancel, reschedule or adjust these orders. Consequently, only a portion of the amount reported above relates to firm, non-cancelable and unconditional obligations.

(4) As of April 30, 2014, we also had approximately $10.3 million of other long-term obligations in our Condensed Consolidated Balance Sheet for unrecognized tax positions that are not included in this table because the timing of any cash settlement with the respective tax authority cannot be reasonably estimated.

Some of our commercial commitments, including some of the future minimum payments in operating leases set forth above and certain commitments to customers, are secured by standby letters of credit collateralized under our Credit Facility or restricted cash. Restricted cash balances are included in other current assets or other long-term assets depending upon the duration of the underlying letter of credit obligation. The following is a summary of our commercial commitments secured by standby letters of credit by commitment expiration date as of April 30, 2014 (in thousands):

	Total		Less than one year		One to three years		Three to five years		Thereafter
Standby letters of credit	$	58,719	$	29,758	$	10,658	$	4,375	$	13,928

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any equity interests in so-called limited purpose entities, which include special purpose entities (SPEs) and structured finance entities.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we reevaluate our estimates, including those related to share-based compensation, bad debts, inventories, intangible and other long-lived assets, income taxes, warranty obligations, restructuring, derivatives and hedging, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Among other things, these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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To the extent that there are material differences between our estimates and actual results, our consolidated financial statements will be affected.

We believe that the following critical accounting policies reflect those areas where significant judgments and estimates are used in the preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectibility is reasonably assured. Customer purchase agreements and customer purchase orders are generally used to determine the existence of an arrangement. Shipping documents and evidence of customer acceptance, when applicable, are used to verify delivery or services rendered. We assess whether the price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer's payment history. Revenue for maintenance services is generally deferred and recognized ratably over the period during which the services are to be performed. Shipping and handling fees billed to customers are included in revenue, with the associated expenses included in product cost of goods sold.

We apply the percentage-of-completion method to long-term arrangements where we are required to undertake significant production, customizations or modification engineering, and reasonable and reliable estimates of revenue and cost are available. Utilizing the percentage-of-completion method, we recognize revenue based on the ratio of actual costs incurred to date to total estimated costs expected to be incurred. In instances that do not meet the percentage-of-completion method criteria, recognition of revenue is deferred until there are no uncertainties regarding customer acceptance. Unbilled percentage- of-completion revenues recognized are accumulated in the contracts in progress account included in accounts receivable, net. Billings in excess of revenues recognized to date on these contracts are recorded within deferred revenue.

Software revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. In instances where final acceptance criteria of the software are specified by the customer, revenue is deferred until there are no uncertainties regarding customer acceptance.

We limit the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or refund privileges.

Revenue for multiple element arrangements is allocated to each unit of accounting based on the relative selling price of each delivered element, with revenue recognized for each delivered element when the revenue recognition criteria are met. We determine the selling price for each deliverable based upon the selling price hierarchy for multiple-deliverable arrangements. Under this hierarchy, we use vendor-specific objective evidence ("VSOE") of selling price, if it exists, or third party evidence ("TPE") of selling price if VSOE does not exist. If neither VSOE nor TPE of selling price exists for a deliverable, we use our best estimate of selling price ("BESP") for that deliverable. For multiple element software arrangements where VSOE of undelivered maintenance does not exist, revenue for the entire arrangement is recognized over the maintenance term.

VSOE, when determinable, is established based on our pricing and discounting practices for the specific product or service when sold separately. In determining whether VSOE exists, we require that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range. We have generally been unable to establish TPE of selling price because our go-to-market strategy differs from that of others in our markets, and the extent of customization and differentiated features and functions varies among comparable products or services from our peers. We determine BESP based upon management-approved pricing guidelines, which consider multiple factors including the type of product or service, gross margin objectives, competitive and market conditions, and the go-to-market strategy, all of which can affect pricing practices.

Our total deferred revenue for products was $36.7 million and $64.3 million as of October 31, 2013 and April 30, 2014, respectively. Our services revenue is deferred and recognized ratably over the period during which the services are to be performed. Our total deferred revenue for services was $75.5 million and $78.0 million as of October 31, 2013 and April 30, 2014, respectively.

Share-Based Compensation

We estimate the fair value of our restricted stock unit awards based on the fair value of our common stock on the date of grant. Our outstanding restricted stock unit awards are subject to service-based vesting conditions and/or performance-based

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vesting conditions. We recognize the estimated fair value of service-based awards, net of estimated forfeitures, as share-based expense ratably over the vesting period on a straight-line basis. Awards with performance-based vesting conditions require the achievement of certain financial or other performance criteria or targets as a condition to the vesting, or acceleration of vesting. We recognize the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon our determination of whether it is probable that the performance targets will be achieved. At each reporting period, we reassess the probability of achieving the performance targets and the performance period required to meet those targets. Determining whether the performance targets will be achieved involves judgment, and the estimate of expense may be revised periodically based on changes in the probability of achieving the performance targets. Revisions are reflected in the period in which the estimate is changed. If any performance goals are not met, no compensation cost is ultimately recognized against that goal and, to the extent previously recognized, compensation cost is reversed.

Because share-based compensation expense is based on awards that are ultimately expected to vest, the amount of expense takes into account estimated forfeitures. We estimate forfeitures at the time of grant and revise these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Changes in these estimates and assumptions can materially affect the measurement of estimated fair value of our share-based compensation. See Note 16 to our Condensed Consolidated Financial Statements in Item 1 of Part I of this report for information regarding our assumptions related to share-based compensation and the amount of share-based compensation expense we incurred for the periods covered in this report. As of April 30, 2014, total unrecognized compensation expense was $72.4 million, which relates to unvested restricted stock units and this expense is expected to be recognized over a weighted-average period of 1.5 years.

We recognize windfall tax benefits associated with the exercise of stock options or release of restricted stock units directly to stockholders' equity only when realized. A windfall tax benefit occurs when the actual tax benefit realized by us upon an employee's disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that we had recorded. When assessing whether a tax benefit relating to share-based compensation has been realized, we follow the tax law with-and-without method. Under the with-and-without method, the windfall is considered realized and recognized for financial statement purposes only when an incremental benefit is provided after considering all other tax benefits including our net operating losses. The with-and-without method results in the windfall from share-based compensation awards always being effectively the last tax benefit to be considered. Consequently, the windfall attributable to share-based compensation will not be considered realized in instances where our net operating loss carryover (that is unrelated to windfalls) is sufficient to offset the current year's taxable income before considering the effects of current-year windfalls.

Incentive Compensation Expense

We provide incentive-based compensation opportunities to employees through cash incentive awards and, as described in “Share-Based Compensation” above, performance-based equity awards. The expense associated with these awards is reflected as a component of employee-related expense within our operating expense and costs of goods sold, as applicable.

For fiscal 2014, the Compensation Committee has approved an annual cash incentive arrangement generally applicable to full-time employees excluding commissioned salespersons, with the aggregate amount of any awards payable dependent upon the achievement of certain financial and operational goals for fiscal 2014. Given that the awards are generally contingent upon achieving annual objectives, the payment of cash incentive awards is not expected to be made until after fiscal year-end results are finalized. As a result, the expense that we accrue for incentive compensation in any interim period in fiscal 2014 is based upon estimates of expected financial results for the year and expected performance against relevant operating objectives. Because assessing actual performance against many of these objectives cannot generally occur until at or near fiscal year-end, determining the amount of expense that we incur in our interim financial statements for incentive compensation involves the judgment of management. Amounts accrued are subject to change in future interim periods if actual future financial results or operational performance are higher or lower than expected. We incurred an aggregate of $22.2 million of expense in the first six months of fiscal 2014 associated with our cash incentive bonus plan for fiscal 2014.

Reserve for Inventory Obsolescence

We make estimates about future customer demand for our products when establishing the appropriate reserve for excess and obsolete inventory. We write down inventory that has become obsolete or unmarketable by an amount equal to the difference between the cost of inventory and the estimated market value based on assumptions about future demand and market conditions. Inventory write downs are a component of our product cost of goods sold. Upon recognition of the write down, a new lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In an effort to limit our exposure to delivery delays and to satisfy customer needs we purchase inventory based on forecasted sales across our product lines. In addition, part of our research and

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development strategy is to promote the convergence of similar features and functionalities across our product lines. Each of these practices exposes us to the risk that our customers will not order products for which we have forecasted sales, or will purchase less than we have forecasted. Historically, we have experienced write-downs due to discontinuance of a product, changes in our strategic direction and declines in market conditions. We recorded charges for excess and obsolete inventory of $9.0 million and $13.0 million in the first six months of fiscal 2013 and 2014, respectively. The charges in fiscal 2014 primarily related to engineering design changes and the discontinuance of certain parts and components used in the manufacture of our Optical Transport products, including our Corestream® Agility Optical Transport platform, and Converged Packet Optical products. Our inventory net of allowance for excess and obsolescence was $249.1 million and $294.0 million as of October 31, 2013 and April 30, 2014, respectively.

Allowance for Doubtful Accounts Receivable

Our allowance for doubtful accounts receivable is based on management's assessment, on a specific identification basis, of the collectibility of customer accounts. We perform ongoing credit evaluations of our customers and generally have not required collateral or other forms of security from customers. In determining the appropriate balance for our allowance for doubtful accounts receivable, management considers each individual customer account receivable in order to determine collectibility. In doing so, we consider creditworthiness, payment history, account activity and communication with such customer. If a customer's financial condition changes, or if actual defaults are higher than our historical experience, we may be required to take a charge for an allowance for doubtful accounts receivable which could have an adverse impact on our results of operations. Our accounts receivable, net of allowance for doubtful accounts, was $488.6 million and $515.0 million as of October 31, 2013 and April 30, 2014, respectively. Our allowance for doubtful accounts was $2.0 million and $1.7 million as of October 31, 2013 and April 30, 2014, respectively.

Long-lived Assets

Our long-lived assets include: equipment, furniture and fixtures, finite-lived intangible assets and maintenance spares. As of October 31, 2013 and April 30, 2014, these assets totaled $366.9 million and $331.1 million, net, respectively. We test long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount is not recoverable from its undiscounted cash flows. Our long-lived assets are assigned to asset groups which represents the lowest level for which we identify cash flows. We measure impairment loss as the amount by which the carrying amount of the asset or asset group exceeds its fair value.

Deferred Tax Valuation Allowance

As of April 30, 2014, we have recorded a valuation allowance offsetting substantially all our net deferred tax assets of $1.5 billion. When measuring the need for a valuation allowance, we assess both positive and negative evidence regarding the realizability of these deferred tax assets. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In determining net deferred tax assets and valuation allowances, management is required to make judgments and estimates related to projections of profitability, the timing and extent of the utilization of net operating loss carryforwards, applicable tax rates, transfer pricing methodologies and tax planning strategies. The valuation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support a reversal. Because evidence such as our operating results during the most recent three-year period is afforded more weight than forecasted results for future periods, our cumulative loss during this three-year period represents sufficient negative evidence regarding the need for nearly a full valuation allowance. We will release this valuation allowance when management determines that it is more likely than not that our deferred tax assets will be realized. Any future release of valuation allowance may be recorded as a tax benefit increasing net income or as an adjustment to paid-in capital, based on tax ordering requirements.

Warranty

Our liability for product warranties, included in other accrued liabilities, was $56.3 million and $56.2 million as of October 31, 2013 and April 30, 2014, respectively. Our products are generally covered by a warranty for periods ranging from one to five years. We accrue for warranty costs as part of our cost of goods sold based on associated material costs, technical support labor costs and associated overhead. Material cost is estimated based primarily upon historical trends in the volume of product returns within the warranty period and the cost to repair or replace the equipment. Technical support labor cost is estimated based primarily upon historical trends and the cost to support the customer cases within the warranty period. The provision for product warranties was $11.1 million and $12.4 million for the first six months of fiscal 2013 and 2014, respectively. See Note 11 to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this report. The provision for warranty claims may fluctuate on a quarterly basis depending upon the mix of products and customers in that period. If actual product failure rates, material replacement costs, service or labor costs differ from our estimates, revisions to

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the estimated warranty provision would be required. An increase in warranty claims or the related costs associated with satisfying our warranty obligations could increase our cost of sales and negatively affect our gross margin.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates.

Interest Rate Sensitivity. We currently hold investments in U.S. Government obligations and commercial paper with varying maturities. See Notes 4 and 5 to our Condensed Consolidated Financial Statements for information relating to investments and fair value. These investments are sensitive to interest rate movements and their fair value will decline as interest rates rise and increase as interest rates decline. The estimated impact on these investments of a 100 basis point (1.0%) increase in interest rates across the yield curve from rates in effect as of the balance sheet date would be a $0.6 million decline in value.

Foreign Currency Exchange Risk. As a global concern, our business and results of operations are exposed to movements in foreign currency exchange rates. Due to our global presence, some of our revenue is non-U.S. dollar denominated with Canadian Dollars and Euros being our most significant foreign currency revenue exposures. If the U.S. dollar strengthens against these currencies, our revenues reported in U.S. dollars would decline. For our U.S. dollar denominated sales, an increase in the value of the U.S. dollar would increase the real cost to our customers of our products in markets outside the United States, which could impact our competitive position.

With regard to operating expense, our primary exposure to foreign currency exchange risk relates to operating expense incurred in Canadian Dollars, British Pounds, Euros and Indian Rupees. During the first six months of fiscal 2014, approximately 48.6% of our operating expense was non-U.S. dollar denominated. If these or other currencies strengthen, costs reported in U.S. dollars will increase. During the first six months of fiscal 2014, research and development expense benefited approximately $9.6 million, net of hedging, due to the strengthening of the U.S. dollar in relation to the Canadian Dollar and the Indian Rupee in comparison to the first six months of fiscal 2013.

From time to time, Ciena uses foreign currency forward contracts to reduce variability in certain forecasted non U.S. dollar denominated cash flows. Generally, these derivatives have maturities of twelve months or less and are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, Ciena assesses whether the forward contract has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The effective portion of the derivative's net gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and, upon the occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Condensed Consolidated Statement of Operations to which the hedged transaction relates. Any net gain or loss associated with the ineffectiveness of the hedging instrument is reported in interest and other income (loss), net.

From time to time, Ciena also uses foreign currency forwards to hedge certain balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net. See Note 2 and Note 12 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Convertible Notes Outstanding. The fair market value of each of our outstanding convertible notes is subject to interest rate and market price risk due to the convertible feature of the notes and other factors. Generally the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The fair market value of the notes may also increase as the market price of our stock rises and decrease as the market price of the stock falls. Interest rate and market value changes affect the fair market value of the notes, and may affect the prices at which we would be able to repurchase such notes were we to do so. These changes do not impact our financial position, cash flows or results of operations. For additional information on the fair value of our outstanding notes, see Note 13 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon

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this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

On May 29, 2008, Graywire, LLC filed a complaint in the United States District Court for the Northern District of Georgia against Ciena and four other defendants, alleging, among other things, that certain of the parties' products infringe U.S. Patent 6,542,673 (the “'673 Patent”), relating to an identifier system and components for optical assemblies. The complaint seeks injunctive relief and damages. In July 2009, upon request of Ciena and certain other defendants, the U.S. Patent and Trademark Office (“PTO”) granted the defendants' inter partes application for reexamination with respect to certain claims of the '673 Patent, and the district court granted the defendants' motion to stay the case pending reexamination of all of the patents-in-suit. In December 2010, the PTO confirmed the validity of some claims and rejected the validity of other claims of the '673 Patent, to which Ciena and other defendants filed an appeal. On March 16, 2012, the PTO on appeal rejected multiple claims of the '673 Patent, including the two claims on which Ciena is alleged to infringe. Subsequently, the plaintiff requested a reopening of the prosecution of the '673 Patent, which request was denied by the PTO on April 29, 2013. Thereafter, on May 28, 2013, the plaintiff filed an amendment with the PTO in which it canceled the claims of the '673 Patent on which Ciena is alleged to infringe. The case currently remains stayed, and there can be no assurance as to whether or when the stay will be lifted.

In addition to the matters described above, we are subject to various legal proceedings and claims arising in the ordinary course of business, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. We do not expect that the ultimate costs to resolve these matters will have a material effect on our results of operations, financial position or cash flows.

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. In addition to the other information contained in this report, you should consider the following risk factors before investing in our securities.

Our revenue and operating results can fluctuate significantly and unpredictably from quarter to quarter.

Our revenue and results of operations can fluctuate significantly and unpredictably from quarter to quarter. Our budgeted expense levels are based on the opportunities for growth which we see in our business, and depend in part on our projections of future revenue and gross margin. Substantial reductions in expense can take time to implement. Uncertainty or lack of visibility into customer spending, changes in economic or market conditions and other factors that affect customer spending, can make it difficult to forecast future revenue and margins. Consequently, our level of operating expense or inventory may be high relative to revenue, which could harm our profitability and cash flow. Additional factors that contribute to fluctuations in our revenue and operating results include:

• broader macroeconomic conditions, including weakness and volatility in global markets, that affect our customers;

• changes in capital spending by large communications service providers;

• order volume and timing;

• backlog levels and the percentage of a given quarter's revenue generated from orders placed during that quarter;

• the timing of our ability to recognize revenue on sales;

• the mix of revenue by product segment, geography and customer in any particular quarter;

• the level of competition and pricing pressure we encounter;

• seasonal effects in our business;

• the level of start-up costs we incur to support initial deployments, gain new customers or enter new markets; and

• our level of success in improving manufacturing efficiencies and achieving cost reductions in our supply chain.

Quarterly fluctuations from these and other factors may cause our results of operations to fall short of or significantly exceed the expectations of securities analysts or investors, which may cause volatility in our stock price.

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We face intense competition that could hurt our sales and results of operations.

We face a competitive market for sales of communications networking equipment, software and services, and this level of competition could result in pricing pressure, reduced demand, lower gross margins and loss of market share that could harm our business and results of operations. Competition is particularly intense as we and our competitors aggressively seek to displace incumbent equipment vendors at large service providers and secure new customers. In an effort to secure customer opportunities and capture market share, we have in the past, and may in the future, agree to commercial terms or pricing that result in low or negative gross margins on a particular order or group of orders. We expect this level of competition to continue or potentially increase, as multinational equipment vendors seek to promote adoption of competing architectural approaches for next-generation networks and retain incumbent positions with large customers globally. We also expect our competitive landscape to broaden. As network technologies, features and layers converge, and demands for software programmability of networks increase, we expect that our business will overlap more directly with additional networking suppliers, including IP router vendors, system integrators, software vendors and other information technology vendors.

Competition in our markets, generally, is based on any one or a combination of the following factors: product features; functionality and performance; price; services offerings; manufacturing capability and lead-times; incumbency and existing business relationships; scalability and flexibility of products to meet the immediate and future network; and service requirements of network operators. A small number of very large companies have historically dominated our industry, many of which have substantially greater financial and marketing resources, broader product offerings and more established relationships with service providers and other customer segments than we do. Because of their scale and resources, they may be perceived to be a better fit for the procurement, or network operating and management, strategies of large service providers. We also compete with a number of smaller companies that provide significant competition for a specific product, application, customer segment or geographic market. Due to the narrower focus of their efforts, these competitors may achieve commercial availability of their products more quickly or may be more attractive to customers in a particular product niche. If competitive pressures increase or we fail to compete successfully in our markets, our business and results of operations could suffer.

Our business and operating results could be adversely affected by unfavorable changes in macroeconomic and market conditions and reductions in the level of spending by customers in response to these conditions.

Our business and operating results could be materially adversely affected by reduced customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or with respect to a particular region where we operate. Broad macroeconomic weakness and market volatility have previously resulted in sustained periods of decreased demand for our products and services that have adversely affected our operating results. Macroeconomic and market conditions could be adversely affected by a variety of political, economic or other factors in the United States and elsewhere that could adversely affect spending levels, as well as create volatility or deteriorating conditions in the markets in which we operate. Continuation of, or an increase in, macroeconomic uncertainty or weakness could result in:

• reductions in customer spending and delay, deferral or cancellation of network infrastructure initiatives;

• increased competition for fewer network projects and sales opportunities;

• increased pricing pressure that may adversely affect revenue, gross margin and profitability;

• difficulty forecasting, budgeting and planning;

• higher overhead costs as a percentage of revenue;

• tightening of credit markets needed to fund capital expenditures by our customers and us;

• customer financial difficulty, including longer collection cycles and difficulties collecting accounts receivable or write-offs of receivables; and

• increased risk of charges relating to excess and obsolete inventories and the write-off of other intangible assets.

Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or with respect to a particular region where we operate, would adversely affect our business and results of operations.

A small number of large communications service providers account for a significant portion of our revenue, and the loss of any of these customers, or a significant reduction in their spending, would have a material adverse effect on our business and results of operations.

A significant portion of our revenue is concentrated among a few, large global communications service providers. By way of example, AT&T accounted for approximately 17.9% of fiscal 2013 revenue, and our largest ten customers contributed 59.4% of fiscal 2013 revenue. Consequently, our financial results are closely correlated with the spending of a relatively small number of service provider customers and can be significantly affected by market or industry changes that affect their businesses or

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changes in their procurement behavior. These factors can include consumer and enterprise spending on communication services, macroeconomic volatility, the adoption of new communications products and services, the emergence of competing network operators and changing demands of end user customers. Because the terms of our framework contracts do not obligate customers to purchase any minimum or guaranteed order quantities, spending by these service providers can be unpredictable and sporadic, and our revenue and operating results can fluctuate on a quarterly basis. Reliance upon a relatively small number of service providers increases our exposure to changes in their network and purchasing strategies. Some of our customers are pursuing efforts to outsource the management and operation of their networks, or have indicated a procurement strategy to reduce the number of vendors from which they purchase equipment, which may benefit our larger competitors. Our concentration in revenue has increased in the past as a result of consolidation among a number of our largest customers. Consolidation may increase the likelihood of temporary or indefinite reductions in customer spending or changes in network strategy that could harm our business and operating results. The loss of one or more of our large service provider customers, a significant change or reduction in their spending, or market or industry factors adversely affecting service providers generally, would have a material adverse effect on our business, financial condition and results of operations.

Our reliance upon third party component suppliers, including sole and limited source suppliers, exposes our business to additional risk and could limit our sales, increase our costs and harm our customer relationships.

We maintain a global sourcing strategy and depend on third party suppliers for support in our product design and development and the sourcing of key product components and subsystems. Our products include optical and electronic components for which reliable, high-volume supply is often available only from sole or limited sources. Increases in market demand or scarcity of resources or manufacturing capability have previously resulted in shortages in availability of important components for our solutions, allocation challenges and increased lead times. We are exposed to risks relating to unfavorable economic conditions or other similar challenges affecting the businesses of our component providers that can affect their liquidity levels, ability to continue investing in their businesses, and manufacturing capability. This could expose our business to increased costs, lack of supply or discontinuation of components that can result in lost revenue, additional product costs, increased lead times and deployment delays that could harm our business and customer relationships. We do not have any guarantee of supply from these third parties, and in certain cases are relying upon temporary or transitional commercial arrangements. As a result, there is no assurance that we will be able to secure the components or subsystems that we require, in sufficient quantity and quality on reasonable terms. The loss of a source of supply, or lack of sufficient availability of key components, could require that we locate an alternate source or redesign our products, either of which could increase our costs and negatively affect our product gross margin and results of operations. Our business and results of operations would be negatively affected if we were to experience any significant disruption or difficulties with key suppliers affecting the price, quality, availability or timely delivery of required components.

Investment of research and development resources in communications networking technologies for which there is not a matching market opportunity, or failure to sufficiently or timely invest in technologies for which there is market demand, would adversely affect our revenue and profitability.

The market for communications networking equipment is characterized by rapidly evolving technologies and changes in market demand. We continually invest in research and development to sustain or enhance our existing products and to develop or acquire new product technologies. There is often a lengthy period between commencing these development initiatives and bringing new or improved products to market. During this time, technology preferences, customer demand and the market for our products, or those introduced by our competitors, may move in directions we had not anticipated. There is no guarantee that our new products or enhancements will achieve market acceptance or that the timing of market adoption will be as predicted. There is a significant possibility, therefore, that some of our development decisions, including significant expenditures on acquisitions, research and development costs, or investments in technologies, will not turn out as anticipated, and that our investment in some projects will be unprofitable. There is also a possibility that we may miss a market opportunity because we failed to invest, or invested too late, in a technology, product or enhancement sought by our customers. Changes in market demand or investment priorities may also cause us to discontinue existing or planned development for new products or features, which can have a disruptive effect on our relationships with customers. If we fail to make the right investments or fail to make them at the right time, our competitive position may suffer, and our revenue and profitability could be harmed.

Network equipment sales to large communications service providers often involve lengthy sales cycles and protracted contract negotiations and may require us to assume commercial terms or conditions that negatively affect pricing, risk allocation, payment and the timing of revenue recognition.

Our sales initiatives, particularly with large service provider customers, often involve lengthy sales cycles that may include extensive product testing, laboratory or network certification, network or region-specific product certification and homologation requirements. These sales also often involve protracted and sometimes difficult contract negotiations in which

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we may deem it necessary to agree to unfavorable contractual or commercial terms that adversely affect pricing, expose us to penalties for delays or non-performance, and require us to assume a disproportionate amount of risk. We may also be requested to provide deferred payment terms, vendor or third-party financing or other alternative purchase structures that extend the timing of payment and revenue recognition. Some of our large existing customers are pursuing purchasing strategies or adopting procurement approaches intended to drive further pricing reductions, seek additional commercial concessions and consolidate their number of direct suppliers of networking technology. To maintain incumbency with key customers for existing and future business opportunities, we may be required to offer discounted pricing or offer less favorable commercial terms as compared to our historical business arrangements with these customers. Our purchase agreements generally do not include minimum purchase commitments, and customers often have the right to modify, delay, reduce or cancel previous orders. These terms may negatively affect our revenue and results of operations and increase our susceptibility to quarterly fluctuations in our financial results. Alternatively, service providers may insist upon terms and conditions that we deem too onerous or not in our best interest, and we may be unable to reach a commercial agreement. As a result, we may incur substantial expense and devote time and resources to potential sales opportunities that never materialize or result in lower than anticipated sales.

We may experience delays in the development of our products that may negatively affect our competitive position and business.

Our products are based on complex technology, and we can experience unanticipated delays in developing and manufacturing these solutions. Delays in these and other product development efforts may affect our reputation with customers, affect our ability to seize market opportunities and impact the timing and level of demand for our products. Each step in the development life cycle of our products presents serious risks of failure, rework or delay, any one of which could adversely affect the cost-effective and timely development of our products. We may encounter delays relating to engineering development activities and software, design, sourcing and manufacture of critical components, and the development of prototypes. In addition, intellectual property disputes, failure of critical design elements, and other execution risks may delay or even prevent the release of these products. If we do not successfully develop products in a timely manner, our competitive position may suffer and our business, financial condition and results of operations could be harmed.

Product performance problems and undetected errors affecting the performance, reliability or security of our products could damage our business reputation and negatively affect our results of operations.

The development and production of sophisticated hardware and software for communications network equipment is complicated. Some of our products can be fully tested only when deployed in communications networks or when carrying traffic with other equipment. As a result, undetected defects or errors, and product quality, interoperability, reliability and performance problems are often more acute for initial deployments of new products and product enhancements. We are in the process of launching a number of new platforms. Unanticipated product performance problems can relate to the design, manufacturing and installation of our products. Undetected errors can also arise as a result of defects in components, software or manufacturing, installation or maintenance services supplied by third parties, and technology acquired from or licensed by third parties. Unanticipated security vulnerabilities relating to our products or the activities of our supply chain, including any actual or perceived exposure of our solutions to malicious software or cyber-attacks, would adversely affect our business and reputation. Product performance, reliability, security and quality problems can negatively affect our business, and may result in some or all of the following effects:

• damage to our reputation, declining sales and order cancellations;

• increased costs to remediate defects or replace products;

• payment of liquidated damages, contractual or similar penalties, or other claims for performance failures or delays;

• increased warranty expense or estimates resulting from higher failure rates, additional field service obligations or other rework costs related to defects;

• increased inventory obsolescence;

• costs and claims that may not be covered by liability insurance coverage or recoverable from third parties; and

• delays in recognizing revenue or collecting accounts receivable.

These and other consequences relating to undetected errors affecting the quality, reliability and security of our products could negatively affect our business and results of operations.

Efforts by us or by our strategic third party channel partners to sell our solutions into targeted geographic markets and customer segments may be unsuccessful.

In order to sell our products into new geographic markets, diversify our customer base and broaden the application for our solutions in communications networks, we continue to promote sales initiatives and foster strategic channel sales relationships, including our recently announced packet optical distribution relationship with Ericsson. We seek to expand our geographic

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reach and increase market share in international markets, including Brazil, the Middle East and India. We also intend to pursue opportunities to diversify our customer base beyond our traditional customers. Specifically, we are targeting sales opportunities with enterprises, wireless operators, cable operators, submarine network operators, content service providers, cloud infrastructure providers, research and education institutions, and federal, state and local governments. To succeed in some of these geographic markets and customer segments we believe that we need to leverage strategic sales channels and distribution arrangements successfully, and we expect these relationships to be an important part of our business. Our efforts may ultimately be unsuccessful, and difficulties selling into these target markets through third party channels could limit our growth and harm our results of operations.

The international scale of our operations exposes us to additional risk and expense that could adversely affect our results of operations.

We market, sell and service our products globally and rely upon a global supply chain for sourcing important components and manufacturing our products. Our international operations are subject to inherent risks, including:

• the impact of economic conditions in countries outside the United States;

• effects of changes in currency exchange rates;

• greater difficulty in collecting accounts receivable and longer collection periods;

• difficulty and cost of staffing and managing foreign operations;

• less protection for intellectual property rights in some countries;

• adverse tax and customs consequences, particularly as related to transfer-pricing issues;

• social, political and economic instability;

• higher incidence of corruption or unethical business practices that could expose us to liability or damage our reputation;

• trade protection measures, export compliance, domestic preference procurement requirements, qualification to transact business and additional regulatory requirements; and

• natural disasters, epidemics and acts of war or terrorism.

We expect that we may enter new international markets and withdraw from or reduce operations in others. Our global operations expose us to additional risk and expense that could give rise to unanticipated liabilities, costs or other difficulties that could adversely affect our operations and financial results.

We may be required to write off significant amounts of inventory as a result of our inventory purchase practices, the obsolescence of product lines or unfavorable market conditions.

To avoid delays and meet customer demand for shorter delivery terms, we place orders with our contract manufacturers and component suppliers based in part on forecasts of customer demand. As a result, our business is exposed to the risk that our customers ultimately may not order the products we have forecast, or will purchase fewer products than forecast. As features and functionalities converge across our product lines, and we introduce new products with overlapping feature sets, it is increasingly possible that customers may forgo purchases of certain products we have inventoried in favor of other products with similar functionality. Market uncertainty can also limit our visibility into customer spending plans and compound the difficulty of forecasting inventory at appropriate levels. Moreover, our customer purchase agreements generally do not include any minimum purchase commitment, and customers often have the right to modify, reduce or cancel purchase quantities. We may also be exposed to the risk of inventory write offs as a result of certain supply chain initiatives, including consolidation and transfer of key manufacturing activities. As a result, we may purchase inventory in anticipation of sales that ultimately do not occur. If we are required to write off or write down a significant amount of inventory, our results of operations for the period would be materially adversely affected.

Our intellectual property rights may be difficult and costly to enforce.

We generally rely on a combination of patents, copyrights, trademarks and trade secret laws to establish and maintain proprietary rights in our products and technology. Although we have been issued numerous patents and other patent applications are currently pending, there can be no assurance that any of these patents or other proprietary rights will not be challenged, invalidated or circumvented, or that our rights will provide us with any competitive advantage. In addition, there can be no assurance that patents will be issued from pending applications or that claims allowed on any patents will be sufficiently broad to protect our technology. Further, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States.

We are subject to the risk that third parties may attempt to access, divert or use our intellectual property without authorization. Protecting against the unauthorized use of our products, technology and other proprietary rights is difficult, time-consuming and expensive, and we cannot be certain that the steps that we are taking will prevent or minimize the risks of such

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unauthorized use. Litigation may be necessary to enforce or defend our intellectual property rights or to determine the validity or scope of the proprietary rights of others. Such litigation could result in substantial cost and diversion of management time and resources, and there can be no assurance that we will obtain a successful result. Any inability to protect and enforce our intellectual property rights, despite our efforts, could harm our ability to compete effectively.

We may incur significant costs in response to claims by others that we infringe their intellectual property rights.

From time to time third parties may assert claims or initiate litigation or other proceedings related to patent, copyright, trademark and other intellectual property rights to technologies and related standards that are relevant to our business. The rate of infringement assertions by patent assertion entities is increasing, particularly in the United States. Generally, these patent owners neither manufacture nor use the patented invention directly, and simply seek to derive value from their ownership through royalties from patent licensing programs.

We could be adversely affected by litigation, other proceedings or claims against us, as well as claims against our manufacturers, suppliers or customers, alleging infringement of third party proprietary rights by our products and technology, or components thereof. Regardless of the merit of these claims, they can be time-consuming, divert the time and attention of our technical and management personnel, and result in costly litigation. These claims, if successful, could require us to:

• pay substantial damages or royalties;

• comply with an injunction or other court order that could prevent us from offering certain of our products;

• seek a license for the use of certain intellectual property, which may not be available on commercially reasonable terms or at all;

• develop non-infringing technology, which could require significant effort and expense and ultimately may not be successful; and

• indemnify our customers or other third parties pursuant to contractual obligations to hold them harmless or pay expenses or damages on their behalf.

Any of these events could adversely affect our business, results of operations and financial condition. Our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions, as we have a lower level of visibility into the development process with respect to such technology and the steps taken to safeguard against the risks of infringing the rights of third parties.

Our failure to manage effectively our relationships with third party service partners could adversely impact our financial results and relationship with customers.

We rely on a number of third party service partners, both domestic and international, to complement our global service and support resources. We rely upon these partners for certain installation, maintenance and support functions. In addition, as network operators seek to increasingly rely on vendors to perform additional services relating to the design, construction and operation of their networks, the scope of work performed by our support partners is likely to increase and may include areas where we have less experience providing or managing such services. We must successfully identify, assess, train and certify qualified service partners in order to ensure the proper installation, deployment and maintenance of our products, as well as the skillful performance of other services associated with expanded solutions offerings, including site assessment and construction related services. Vetting and certification of these partners can be costly and time-consuming, and certain partners may not have the same operational history, financial resource and scale as Ciena. Moreover, certain service partners may provide similar services for other companies, including our competitors. We may not be able to manage effectively our relationships with our service partners and cannot be certain that they will be able to deliver services in the manner or time required or that we will be able to maintain the continuity of their services. We may also be exposed to a number of risks or challenges relating to the performance of our service partners, including:

• we may suffer delays in recognizing revenue;

• we may be exposed to liability for injuries to persons, damage to property or other claims relating to the actions or omissions of our service partners;

• our services revenue and gross margin may be adversely affected; and

• our relationships with customers could suffer.

If we do not manage effectively our relationships with third party service partners, or if they fail to perform these services in the manner or time required, our financial results and relationships with customers could be adversely affected.

We may be exposed to unanticipated risks and additional obligations in connection with our resale of complementary products or technology of other companies.

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We have entered into agreements with strategic supply partners that permit us to distribute their products or technology. We may rely upon these relationships to add complementary products or technologies, diversify our product portfolio, or address a particular customer or geographic market. We may enter into additional original equipment manufacturer (OEM), resale or similar strategic arrangements in the future. We may incur unanticipated costs or difficulties relating to our resale of third party products. Our third party relationships could expose us to risks associated with the business, financial condition, intellectual property rights and supply chain continuity of such partners, as well as delays in their development, manufacturing or delivery of products or technology. We may also be required by customers to assume warranty, indemnity, service and other commercial obligations, including potential liability to customers, greater than the commitments, if any, made to us by our technology partners. Some of our strategic supply partners are relatively small companies with limited financial resources. If they are unable to satisfy their obligations to us or our customers, we may have to expend our own resources to satisfy these obligations. Exposure to these risks could harm our reputation with key customers and negatively affect our business and our results of operations.

Our exposure to the credit risks of our customers and resellers may make it difficult to collect receivables and could adversely affect our revenue and operating results.

In the course of our sales to customers and resale channel partners, we may have difficulty collecting receivables and our business and results of operations could be exposed to risks associated with uncollectible accounts. Lack of liquidity in the capital markets, macroeconomic weakness and market volatility may increase our exposure to these credit risks. Our attempts to monitor these situations carefully and to take appropriate measures to protect ourselves may not be sufficient, and it is possible that we may have to write down or write off accounts receivable. Such write-downs or write-offs could negatively affect our operating results for the period in which they occur, and, if large, could have a material adverse effect on our revenue and operating results.

Our business is dependent upon the proper functioning of our internal business processes and information systems, and modification or interruption of such systems may disrupt our business, processes and internal controls.

We rely upon a number of internal business processes and information systems to support key business functions, and the efficient operation of these processes and systems is critical to managing our business. Our business processes and information systems need to be sufficiently scalable to support the growth of our business and may require modifications or upgrades that expose us to a number of operational risks. We are currently pursuing initiatives to transform and optimize our business operations through the reengineering of certain processes, investment in automation and engagement of strategic partners or resources to assist with certain business functions. These changes may be costly and disruptive to our operations, and could impose substantial demands on management time.

These changes may also require changes in our information systems, modification of internal control procedures and significant training of employees or third party resources. There can be no assurance that our business and operations will not experience any disruption in connection with this transition. Our information technology systems, and those of third party information technology providers or business partners, may also be vulnerable to damage or disruption caused by circumstances beyond our control, including catastrophic events, power anomalies or outages, natural disasters, viruses or malware, and computer system or network failures. We may also be exposed to cyber-security related incidents, including unauthorized access of information systems and disclosure or diversion of intellectual property or confidential data. There can be no assurance that our business systems or those of our third party business partners would not be subject to similar incidents, exposing us to significant cost, reputational harm and disruption or damage to our business.

Data security breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.

In the ordinary course of our business, we maintain on our network systems certain information that is confidential, proprietary or otherwise sensitive in nature. This information includes intellectual property, financial information and confidential business information relating to Ciena and our customers, suppliers and and other business partners. We also produce networking equipment solutions and software used by network operators to ensure security and reliability in their management and transmission of data. Our customers, particularly those in regulated industries, are increasingly focused on the security features of our technology solutions, and maintaining the security of information sensitive to Ciena and our business partners is critical to our business and reputation. Companies in the technology industry have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access to networks or sensitive information. Our network systems and storage applications, and the technology solutions that we offer to end customers, may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions. In some cases, it is difficult to anticipate or immediately detect such incidents and the damage caused thereby. If an actual or

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perceived breach of network security occurs in our network or in the network of a business partner, the market perception of our products could be harmed. While Ciena continually works to safeguard our products and internal network systems to mitigate these potential risks, there is no assurance that such actions will be sufficient to prevent cyber attacks or security breaches. Security incidents involving access or improper use our systems, networks or products could compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations. These security events could also negatively impact our reputation and our competitive position and could result in litigation with third parties, regulatory action, loss of business, potential liability and increased remediation costs, any of which could have a material adverse effect on our financial condition and results of operations.

Outstanding indebtedness under our convertible notes may adversely affect our liquidity and results of operations and could limit our business.

At April 30, 2014, indebtedness on our outstanding convertible notes totaled approximately $1.2 billion in aggregate principal, including the accretion of principal at maturity on our 2020 Notes. Our indebtedness could have important negative consequences, including:

• increasing our vulnerability to adverse economic and industry conditions;

• limiting our ability to obtain additional financing, particularly in unfavorable capital and credit market conditions;

• incurrence of debt service and repayment obligations that reduce the availability of cash resources for other business purposes;

• limiting our flexibility in planning for, or reacting to, changes in our business and the markets; and

• placing us at a possible competitive disadvantage to competitors that have better access to capital resources.

During fiscal 2012, we entered into a $150 million senior secured asset-based revolving Credit Facility. In addition to customary remedies that would apply should we default under the credit agreement governing this facility, we may be subject to lender control over certain cash assets and required to comply with a fixed charge coverage ratio in the event that we do not maintain the requisite level of availability under the facility. The credit agreement also contains customary covenants that limit our ability to, among other things, pay cash dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, enter into certain acquisition transactions, repay indebtedness, make investments or dispose of assets. The Credit Facility matures on August 13, 2015, provided that it will mature early on December 15, 2014, if any of Ciena's 4.0% convertible senior notes due March 15, 2015 are then outstanding. We may also enter into additional transactions or lending facilities, including equipment loans, working capital lines of credit and other long-term debt, which may increase our indebtedness and result in additional restrictions upon our business.

Significant volatility and uncertainty in the capital markets may limit our access to funding.

We have accessed the capital markets in the past and successfully raised funds, through the issuance of equity or convertible debt, to increase our cash position, support our operations and undertake strategic growth initiatives. We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our long-term operating plans and may consider it necessary or advisable to raise additional capital in the future. Global capital markets have undergone periods of significant volatility and uncertainty in recent years, and there can be no assurance that such financing alternatives would be available to us, should we determine it necessary or advisable to seek additional cash resources.

Facilities transitions could be disruptive to our operations and may result in unanticipated expense and adverse effects to our cash position and cash flows.

We have recently undertaken and expect to undertake in the future a number of significant facilities transitions affecting a number of our largest employee populations. The leases of our “Lab 10” building on the Carling Campus in Ottawa, Canada and our development facility in Gurgaon, India will expire in fiscal 2017, and we are currently considering facilities and development alternatives in advance of the expiration of these leases. Both locations include sophisticated research and development lab equipment and significant headcount including key engineering personnel. Locating appropriate alternative space for our engineering operations may be costly, and there can be no assurance that the transition of key engineering functions to a successor facility will not be disruptive or adversely affect productivity. Significant facilities transitions could be disruptive to our operations and may result in unanticipated expense and adverse effects on our cash position and cash flows.

Restructuring activities could disrupt our business and affect our results of operations.

We have previously taken steps, including reductions in force, office closures, and internal reorganizations to reduce the size and cost of our operations, improve efficiencies, or realign our organization and staffing to better match our market

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opportunities and our technology development initiatives. We may take similar steps in the future as we seek to realize operating synergies, optimize our operations to achieve our target operating model and profitability objectives, or better reflect changes in the strategic direction of our business. These changes could be disruptive to our business, including our research and development efforts, and could result in significant expense, including accounting charges for inventory and technology-related write-offs, workforce reduction costs and charges relating to consolidation of excess facilities. Substantial expense or charges resulting from restructuring activities could adversely affect our results of operations and use of cash in those periods in which we undertake such actions.

If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively.

Competition to attract and retain highly skilled technical, engineering and other personnel with experience in our industry is intense, and our employees have been the subject of targeted hiring by our competitors. We may experience difficulty retaining and motivating existing employees and attracting qualified personnel to fill key positions. Because we rely upon equity awards as a significant component of compensation, particularly for our executive team, a lack of positive performance in our stock price, reduced grant levels, or changes to our compensation program may adversely affect our ability to attract and retain key employees. In addition, none of our executive officers is bound by an employment agreement for any specific term. The loss of members of our management team or other key personnel could be disruptive to our business, and, were it necessary, it could be difficult to replace members of our management team or other key personnel. If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively, and our operations and results of operations could suffer.

We may be adversely affected by fluctuations in currency exchange rates.

As a global concern, we face exposure to adverse movements in foreign currency exchange rates. Due to our increased global presence, a larger percentage of our revenue and operating expense are non-U.S. dollar denominated and therefore subject to foreign currency fluctuation. We face exposure to currency exchange rates as a result of the growth in our non-U.S. dollar denominated operating expense in Canada, Europe, Asia and Latin America. From time to time, we may hedge against currency exposure associated with anticipated foreign currency cash flows. There can be no assurance that any hedging instruments will be effective, and losses associated with these instruments and the adverse effect of foreign currency exchange rate fluctuation may negatively affect our results of operations.

Our products incorporate software and other technology under license from third parties, and our business would be adversely affected if this technology were no longer available to us on commercially reasonable terms.

We integrate third party software and other technology into our embedded operating system, network management system tools and other products. Licenses for this technology may not be available or continue to be available to us on commercially reasonable terms. Third party licensors may insist on unreasonable financial or other terms in connection with our use of such technology. Our failure to comply with the terms of any license, including free open source software, may result in our inability to continue to use such license, which may result in significant costs and require us to obtain or develop a substitute technology. As networks become more open and software programmable, we expect that communications networking solutions vendors, including Ciena, will increasingly contribute to and use technology developed by standards settings bodies or other industry forums that seek to promote the integration of network layers and functions. This may increase risks associated with our use or reliance upon third party or open source software. Difficulty obtaining and maintaining third party technology licenses may disrupt development of our products and increase our costs.

Strategic acquisitions and investments may expose us to increased costs and unexpected liabilities.

We may acquire or make investments in other technology companies, or enter into other strategic relationships, to expand the markets we address, diversify our customer base or acquire, or accelerate the development of, technology or products. To do so, we may use cash, issue equity that could dilute our current stockholders, or incur debt or assume indebtedness. These transactions involve numerous risks, including:

• significant integration costs;

• disruption due to the integration and rationalization of operations, products, technologies and personnel;

• diversion of management attention;

• difficulty completing projects of the acquired company and costs related to in-process projects;

• loss of key employees;

• ineffective internal controls over financial reporting;

• dependence on unfamiliar suppliers or manufacturers;

56

• exposure to unanticipated liabilities, including intellectual property infringement claims; and

• adverse tax or accounting effects including amortization expense related to intangible assets and charges associated with impairment of goodwill.

As a result of these and other risks, our acquisitions, investments or strategic transactions may not reap the intended benefits and may ultimately have a negative impact on our business, results of operation and financial condition.

Changes in government regulation affecting the communications industry and the businesses of our customers could harm our prospects and operating results.

The Federal Communications Commission, or FCC, has jurisdiction over the U.S. communications industry, and similar agencies have jurisdiction over the communication industries in other countries. Many of our largest customers, including service providers and multiservice network operators, are subject to the rules and regulations of these agencies. Changes in regulatory requirements applicable to wireline or wireless communications and the Internet in the United States or other countries could serve as a disincentive to providers to invest in their communications network infrastructures or introduce new services. These changes could adversely affect the sale of our products and services. Changes in regulatory tariff requirements or other regulations relating to pricing or terms of carriage on communications networks could slow the development or expansion of network infrastructures and adversely affect our business, operating results, and financial condition.

Government regulations affecting the use, import or export of products could adversely affect our operations, negatively affect our revenue and increase our costs.

The United States and various foreign governments have imposed controls, license requirements and other restrictions on the usage, import or export of some of the technologies that we sell. Government regulation of usage, import or export of our products, technology within our products, or our failure to obtain required approvals for our products, could harm our international and domestic sales and adversely affect our revenue and costs of sales. Failure to comply with such regulations could result in enforcement actions, fines, penalties or restrictions on export privileges. In addition, costly tariffs on our equipment, restrictions on importation, trade protection measures and domestic preference requirements of certain countries could limit our access to these markets and harm our sales. For example, India's government has implemented security regulations applicable to network equipment vendors, and has previously imposed significant tariffs on certain communications equipment. These and other regulations could adversely affect the sale or use of our products, substantially increase our cost of sales and adversely affect our business and revenue.

Government regulations related to the environment and potential climate change could adversely affect our business and operating results.

Our operations are regulated under various federal, state, local and international laws relating to the environment and potential climate change. If we were to violate or become liable under these laws or regulations, we could incur fines, costs related to damage to property or personal injury, and costs related to investigation or remediation activities. Our product design efforts and the manufacturing of our products are also subject to evolving requirements relating to the presence of certain materials or substances in our equipment, including regulations that make producers for such products financially responsible for the collection, treatment and recycling of certain products. For example, our operations and financial results may be negatively affected by environmental regulations, such as the Waste Electrical and Electronic Equipment (WEEE) and Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) that have been adopted by the European Union. Compliance with these and similar environmental regulations may increase our cost of designing, manufacturing, selling and removing our products. These regulations may also make it difficult to obtain supply of compliant components or may require us to write off non-compliant inventory, which could have an adverse effect on our business and operating results.

We may be required to write down long-lived assets, and these impairment charges would adversely affect our operating results.

As of April 30, 2014, our balance sheet includes $331.1 million in long-lived assets, which includes $155.1 million of intangible assets.Valuation of our long-lived assets requires us to make assumptions about future sales prices and sales volumes for our products. These assumptions are used to forecast future, undiscounted cash flows upon which our estimates are based. Periods of significant uncertainty or instability of macroeconomic conditions can make forecasting future business difficult. If actual market conditions differ or our forecasts change, we may be required to reassess long-lived assets and could record an impairment charge. Any impairment charge relating to long-lived assets would have the effect of decreasing our earnings or

57

increasing our losses in such period. If we are required to take a substantial impairment charge, our operating results would be materially adversely affected in such period.

Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include in our annual report a report containing management's assessment of the effectiveness of our internal controls over financial reporting as of the end of our fiscal year and a statement as to whether or not such internal controls are effective. Compliance with these requirements has resulted in, and is likely to continue to result in, significant costs and the commitment of time and operational resources. Changes in our business, including certain initiatives to transform business processes, to invest in information systems or to transition certain functions to third party resources or providers, will necessitate modifications to our internal control systems, processes and information systems as we optimize our business and operations. Our increased global operations and expansion into new regions could pose additional challenges to our internal control systems. We cannot be certain that our current design for internal control over financial reporting, or any additional changes to be made, will be sufficient to enable management to determine that our internal controls are effective for any period, or on an ongoing basis. If we are unable to assert that our internal controls over financial reporting are effective, market perception of our financial condition and the trading price of our stock may be adversely affected, and customer perception of our business may suffer.

Our stock price is volatile.

Our common stock price has experienced substantial volatility in the past and may remain volatile in the future. Volatility in our stock price can arise as a result of a number of the factors discussed in this “Risk Factors” section. During fiscal 2013, our closing stock price ranged from a high of $27.67 per share to a low of $13.16 per share. The stock market has experienced significant price and volume fluctuation that has affected the market price of many technology companies, with such volatility often unrelated to the operating performance of these companies. Divergence between our actual or anticipated financial results and published expectations of analysts, or the expectations of the market generally, can cause significant swings in our stock price. Our stock price could also be affected by announcements that we, our competitors, or our customers may make, particularly announcements related to acquisitions or other significant transactions. Our common stock is included in certain market indices, and any change in the composition of these indices to exclude our company would adversely affect our stock price. These and other factors affecting macroeconomic conditions or financial markets may materially adversely affect the market price of our common stock in the future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

58

Item 6. Exhibits

10.1	Third Amendment to Ciena Corporation 2008 Omnibus Incentive Plan dated April 10, 2014
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

59

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Ciena Corporation
Date:	June 11, 2014	By:	/s/ Gary B. Smith
			Gary B. Smith
			President, Chief Executive Officer and Director (Duly Authorized Officer)
Date:	June 11, 2014	By:	/s/ James E. Moylan, Jr.
			James E. Moylan, Jr.
			Senior Vice President, Finance and Chief Financial Officer (Principal Financial Officer)

60

EX-10.1

Ex 10.1

AMENDMENT TO

CIENA CORPORATION 2008 OMNIBUS INCENTIVE PLAN

THIS AMENDMENT No. 3 (this “Amendment”) to the Ciena Corporation 2008 Omnibus Incentive Plan (the “Plan”) which increases the number of shares available for issuance under the Plan by six million, six hundred thousand (6,600,000) shares, was adopted by the Board of Directors of Ciena Corporation (the “Company”) on February 4, 2014, and is effective as of April 10, 2014, the date upon which the Amendment received approval of the stockholders of the Company.

1.  The Plan is hereby amended by deleting Section 4.1 and replacing it in its entirety as follows:

“4.1. Number of Shares Available for Awards.

Subject to adjustment as provided in Section 17 hereof, the number of shares of Stock available for issuance under the Plan shall be twenty five million one hundred thousand (25,100,000), all of which may be granted as Incentive Stock Options, increased by shares of Stock covered by awards granted under a Prior Plan that are not purchased or are forfeited or expire, or otherwise terminate without delivery of any Stock subject thereto, to the extent such shares would again be available for issuance under such Prior Plan. Stock issued or to be issued under the Plan shall be authorized but unissued shares; or, to the extent permitted by applicable law, issued shares that have been reacquired by the Company.”

* * *

To record adoption of the Amendment of the Plan by the Board as of February 4, 2014, and approval of the Amendment by the Company’s stockholders on April 10, 2014, the Company has caused its authorized officer to execute this Amendment to the Plan.

CIENA CORPORATION

By: /S/ David M. Rothenstein

Name: David M. Rothenstein

Title: Sr. VP, General Counsel and Secretary

Date: April 10, 2014

EX-31.1

EXHIBIT 31.1

CIENA CORPORATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Gary B. Smith, certify that:

1. I have reviewed this quarterly report of Ciena Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 11, 2014

/s/ Gary B. Smith  

Gary B. Smith 

President and Chief Executive Officer 

EX-31.2

EXHIBIT 31.2

CIENA CORPORATION

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, James E. Moylan, Jr., certify that:

1. I have reviewed this quarterly report of Ciena Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 11, 2014

/s/ James E. Moylan Jr.

James E. Moylan Jr.

Senior Vice President and Chief Financial Officer 

EX-32.1

EXHIBIT 32.1

CIENA CORPORATION

Written Statement of Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, the Chief Executive Officer of Ciena Corporation (the “Company”), hereby certifies that, to his knowledge, on the date hereof:

(a) the Report on Form 10-Q of the Company for the quarter ended April 30, 2014 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gary B. Smith  

Gary B. Smith 

President and Chief Executive Officer 

June 11, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Ciena Corporation and will be retained by Ciena Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CIENA CORPORATION

Written Statement of Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, the Chief Financial Officer of Ciena Corporation (the “Company”), hereby certifies that, to his knowledge, on the date hereof:

(a) the Report on Form 10-Q of the Company for the quarter ended April 30, 2014 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James E. Moylan Jr.

Senior Vice President and Chief Financial Officer 

June 11, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Ciena Corporation and will be retained by Ciena Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013
Significant Accounting Policies [Line Items]
Expected economic lives of finite-lived intangible assets, maximum (in years)	7 years
Expected number of years Spares usage cost is expensed (in years)	4 years
One-time employee termination benefits related service period (more than 60 days)	60 days
4.0% Convertible Senior Notes due March 15, 2015 [Member]
Significant Accounting Policies [Line Items]
Interest rate on convertible notes	4.00%
Maximum [Member]
Significant Accounting Policies [Line Items]
Measurement period for marketable debt securities (in years)	1 year
Derivative maturity (in months)	12 months
Maximum [Member] | Equipment, Furniture and Fixtures [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives capitalized and amortized straight-line (in years)	5 years
Maximum [Member] | Software and Website Development [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives capitalized and amortized straight-line (in years)	5 years
Minimum [Member] | Equipment, Furniture and Fixtures [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives capitalized and amortized straight-line (in years)	2 years
Minimum [Member] | Software and Website Development [Member]
Significant Accounting Policies [Line Items]
Estimated useful lives capitalized and amortized straight-line (in years)	2 years
Interest and Other Income, Net [Member]
Significant Accounting Policies [Line Items]
Net gain (loss) on foreign currency re-measurement and exchange rate changes	$ 5.3	$ (3.0)
Increase (decrease) in fair value of embedded redemption feature	(2.6)	0.4
Losses related to foreign currency forward contracts	$ 10.2	$ 0.1

XML

Convertible Notes Payable - Summary of Notes Due 2020 (Details) (4.0% Convertible Senior Notes due December 15, 2020 [Member], USD $) In Thousands, unless otherwise specified	Apr. 30, 2014
Debt Instrument [Line Items]
Interest rate on convertible notes	4.00%
Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Liability component, Principal balance	$ 192,216
Liability component, Unamortized discount	15,575
Liability component, Net carrying amount	176,641
Equity component, Net carrying amount	$ 43,131

XML

Equipment, Furniture and Fixtures (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Oct. 31, 2013
Property, Plant and Equipment, Net [Abstract]
Equipment, furniture and fixtures, gross	$ 426,011		$ 410,821
Accumulated depreciation and amortization	(306,135)		(291,092)
Equipment, furniture and fixtures, net	119,876		119,729
Equipment, furniture and fixtures (Textuals) [Abstract]
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements	27,143	28,857
Equipment Furniture Fixtures And Leasehold Improvements [Member]
Equipment, furniture and fixtures (Textuals) [Abstract]
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements	22,900	25,400
Equipment, Furniture and Fixtures [Member]
Property, Plant and Equipment, Net [Abstract]
Equipment, furniture and fixtures, gross	379,569		364,574
Leasehold Improvements [Member]
Property, Plant and Equipment, Net [Abstract]
Equipment, furniture and fixtures, gross	$ 46,442		$ 46,247

XML

Convertible Notes Payable (Details) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014
Carrying value and estimated current fair value of outstanding convertible notes
Carrying value	$ 1,214,288
Fair Value	1,404,852	[1]
4.0% Convertible Senior Notes due March 15, 2015 [Member]
Carrying value and estimated current fair value of outstanding convertible notes
Carrying value	187,647	[2]
Fair Value	214,805	[1],[2]
Interest rate on convertible notes	4.00%
0.875% Convertible Senior Notes due June 15, 2017 [Member]
Carrying value and estimated current fair value of outstanding convertible notes
Carrying value	500,000
Fair Value	494,375	[1]
Interest rate on convertible notes	0.875%
3.75% Convertible Senior Notes due October 15, 2018 [Member]
Carrying value and estimated current fair value of outstanding convertible notes
Carrying value	350,000
Fair Value	448,875	[1]
Interest rate on convertible notes	3.75%
4.0% Convertible Senior Notes due December 15, 2020 [Member]
Carrying value and estimated current fair value of outstanding convertible notes
Carrying value	176,641	[3]
Fair Value	$ 246,797	[1],[3]
Interest rate on convertible notes	4.00%

[1] The convertible notes were categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its outstanding convertible notes using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

[2] Includes unamortized bond premium related to embedded redemption feature.

[3] Includes unamortized discount and accretion of principal.

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Oct. 31, 2013
Inventories
Raw materials	$ 56,689		$ 53,274
Work-in-process	7,919		7,773
Finished goods	181,020		153,855
Deferred cost of goods sold	95,783		75,764
Inventories before provision	341,411		290,666
Provision for excess and obsolescence	(47,459)		(41,563)
Total inventories	293,952		249,103
Provisions	$ 12,972	$ 9,027

XML

Other Balance Sheet Details (Tables)

6 Months Ended

Apr. 30, 2014

Balance Sheet Related Disclosures [Abstract]

Other long-term assets

As of the dates indicated, other long-term assets are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Maintenance spares inventory, net	$	61,305	$	56,090
Deferred debt issuance costs, net	15,677		13,302
Embedded redemption feature	2,740		—
Restricted cash	2,053		141
Other	4,605		4,560
	$	86,380	$	74,093

Accrued liabilities

As of the dates indicated, accrued liabilities are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Warranty	$	56,303	$	56,167
Compensation, payroll related tax and benefits	98,770		64,113
Vacation	32,118		34,503
Current restructuring liabilities	674		677
Interest payable	6,186		6,179
Other	77,605		92,797
	$	271,656	$	254,436

Accrued warranty

The following table summarizes the activity in Ciena’s accrued warranty for the fiscal periods indicated (in thousands):

						Balance at
Six months ended	Beginning					end of
April 30,	Balance		Provisions	Settlements		period
2013	$	55,132	11,060	(11,463	)	$	54,729
2014	$	56,303	12,424	(12,560	)	$	56,167

Deferred revenue

As of the dates indicated, deferred revenue is comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Products	$	36,671		$	64,326
Services	75,499			77,967
	112,170			142,293
Less current portion	(88,550		)	(118,473		)
Long-term deferred revenue	$	23,620		$	23,820

XML

Earnings (Loss) Per Share Calculation (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Numerator
Net loss	$ (10,158)	$ (27,079)	$ (26,094)	$ (74,403)
Denominator
Weighted average basic common shares outstanding (in shares)	105,451	101,913	104,977	101,560
Weighted average dilutive potential common shares outstanding (in shares)	105,451	101,913	104,977	101,560
EPS
Basic EPS (in dollars per share)	$ (0.10)	$ (0.27)	$ (0.25)	$ (0.73)
Diluted EPS (in dollars per share)	$ (0.10)	$ (0.27)	$ (0.25)	$ (0.73)

XML

Significant Accounting Policies (Policies)

6 Months Ended

Apr. 30, 2014

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of the financial statements and related disclosures in conformity with accounting principles generally

accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for selling prices for multiple element arrangements, share-based compensation, convertible notes payable valuations, bad debts, valuation of inventories and investments, recoverability of intangible assets, other long-lived assets, income taxes, warranty obligations, restructuring liabilities, derivatives, incentive compensation, contingencies and litigation. Ciena bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results may differ materially from management’s estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

Ciena considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Restricted cash collateralizing letters of credit is included in other current assets and other long-term assets depending upon the duration of the restriction.

Investments

Investments

Ciena's investments are classified as available-for-sale and are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Ciena recognizes losses when it determines that declines in the fair value of its investments below their cost basis are other-than-temporary. In determining whether a decline in fair value is other-than-temporary, Ciena considers various factors including market price (when available), investment ratings, the financial condition and near-term prospects of the investee, the length of time and the extent to which the fair value has been less than Ciena's cost basis, and its intent and ability to hold the investment until maturity or for a period of time sufficient to allow for any anticipated recovery in market value. Ciena considers all marketable debt securities that it expects to convert to cash within one year or less to be short-term investments, with all others considered to be long-term investments.

Inventories

Inventories

Inventories are stated at the lower of cost or market, with cost computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Ciena records a provision for excess and obsolete inventory when an impairment has been identified.

Segment Reporting

Segment Reporting

Ciena's chief operating decision maker, its chief executive officer, evaluates the company's performance and allocates resources based on multiple factors, including measures of segment profit (loss). Operating segments are defined as components of an enterprise that engage in business activities that may earn revenue and incur expense, for which discrete financial information is available, and for which such information is evaluated regularly by the chief operating decision maker for purposes of allocating resources and assessing performance. Ciena considers the following to be its operating segments for reporting purposes: (i) Converged Packet Optical, (ii) Packet Networking, (iii) Optical Transport, and (iv) Software and Services.

Long-lived Assets

Long-lived Assets

Long-lived assets include: equipment, furniture and fixtures; intangible assets; and maintenance spares. Ciena tests long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the asset's carrying amount is not recoverable from its undiscounted cash flows. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. Ciena's long-lived assets are assigned to asset groups which represent the lowest level for which cash flows can be identified.

Equipment, Furniture and Fixtures

Equipment, Furniture and Fixtures and Internal Use Software

Equipment, furniture and fixtures are recorded at cost. Depreciation and amortization are computed using the straight-line method over useful lives of two to five years for equipment, furniture and fixtures, and the shorter of useful life or lease term for leasehold improvements.

Research and Development

Research and Development

Ciena charges all research and development costs to expense as incurred. Types of expense incurred in research and development include employee compensation, cost of prototype equipment, consulting and third party services, depreciation, facility costs and information technology.

Qualifying internal use software and website development costs incurred during the application development stage, which consist primarily of outside services and purchased software license costs, are capitalized and amortized straight-line over the estimated useful lives of two to five years.

Intangible Assets

Intangible Assets

Ciena has recorded finite-lived intangible assets as a result of several acquisitions. Finite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the expected economic lives of the respective assets, up to seven years, which approximates the use of intangible assets.

Maintenance Spares

Maintenance Spares

Maintenance spares are recorded at cost. Spares usage cost is expensed ratably over four years.

Concentrations

Concentrations

Substantially all of Ciena's cash and cash equivalents are maintained at a small number of major U.S. financial institutions. The majority of Ciena's cash equivalents consist of money market funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. Because these deposits generally may be redeemed upon demand, management believes that they bear minimal risk.

Historically, a significant percentage of Ciena's revenue has been concentrated among sales to a small number of large communications service providers. Consolidation among Ciena's customers has increased this concentration. Consequently, Ciena's accounts receivable are concentrated among these customers. See Note 17 below.

Additionally, Ciena's access to certain materials or components is dependent upon sole or limited source suppliers. The inability of any of these suppliers to fulfill Ciena's supply requirements, or significant changes in supply cost, could affect future results. Ciena relies on a small number of contract manufacturers to perform the majority of the manufacturing for its products. If Ciena cannot effectively manage these manufacturers and forecast future demand, or if these manufacturers fail to deliver products or components on time, Ciena's business and results of operations may suffer.

Revenue Recognition

Revenue Recognition

Ciena recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectibility is reasonably assured. Customer purchase agreements and customer purchase orders are generally used to determine the existence of an arrangement. Shipping documents and evidence of customer acceptance, when applicable, are used to verify delivery or services rendered. Ciena assesses whether the price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Ciena assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer's payment history. Revenue for maintenance services is generally deferred and recognized ratably over the period during which the services are performed. Shipping and handling fees billed to customers are included in revenue, with the associated expenses included in product cost of goods sold.

Ciena applies the percentage-of-completion method to long-term arrangements where it is required to undertake significant production, customizations or modification engineering, and reasonable and reliable estimates of revenue and cost are available. Utilizing the percentage-of-completion method, Ciena recognizes revenue based on the ratio of actual costs incurred to date to total estimated costs expected to be incurred. In instances that do not meet the percentage-of-completion method criteria, recognition of revenue is deferred until there are no uncertainties regarding customer acceptance. Unbilled percentage- of-completion revenues recognized are accumulated in the contracts in progress account included in accounts receivable, net. Billings in excess of revenues recognized to date on these contracts are recorded within deferred revenue.

Software revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. In instances where final acceptance criteria of the software are specified by the customer, revenue is deferred until there are no uncertainties regarding customer acceptance.

Ciena limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or refund privileges.

Revenue for multiple element arrangements is allocated to each unit of accounting based on the relative selling price of each delivered element, with revenue recognized for each delivered element when the revenue recognition criteria are met. Ciena determines the selling price for each deliverable based upon the selling price hierarchy for multiple-deliverable arrangements. Under this hierarchy, Ciena uses vendor-specific objective evidence ("VSOE") of selling price, if it exists, or third party evidence ("TPE") of selling price if VSOE does not exist. If neither VSOE nor TPE of selling price exists for a deliverable, Ciena uses its best estimate of selling price ("BESP") for that deliverable. For multiple element software arrangements where VSOE of undelivered maintenance does not exist, revenue for the entire arrangement is recognized over the maintenance term.

VSOE, when determinable, is established based on Ciena's pricing and discounting practices for the specific product or service when sold separately. In determining whether VSOE exists, Ciena requires that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range. Ciena has been unable to establish TPE of selling price because its go-to-market strategy differs from that of others in its markets, and the extent of customization and differentiated features and functions varies among comparable products or services from its peers. Ciena determines BESP based upon management-approved pricing guidelines, which consider multiple factors including the type of product or service, gross margin objectives, competitive and market conditions, and the go-to-market strategy, all of which can affect pricing practices.

Warranty Accruals

Warranty Accruals

Ciena provides for the estimated costs to fulfill customer warranty obligations upon recognition of the related revenue. Estimated warranty costs include estimates for material costs, technical support labor costs and associated overhead. Warranty is included in cost of goods sold and is determined based upon actual warranty cost experience, estimates of component failure rates and management's industry experience. Ciena's sales contracts do not permit the right of return of the product by the customer after the product has been accepted.

Accounts Receivable, Net

Accounts Receivable, Net

Ciena's allowance for doubtful accounts is based on its assessment, on a specific identification basis, of the collectibility of customer accounts. Ciena performs ongoing credit evaluations of its customers and generally has not required collateral or other forms of security from its customers. In determining the appropriate balance for Ciena's allowance for doubtful accounts, management considers each individual customer account receivable in order to determine collectibility. In doing so, management considers creditworthiness, payment history, account activity and communication with the customer. If a customer's financial condition changes, Ciena may be required to record an allowance for doubtful accounts, which would negatively affect its results of operations.

Government Grants

Government Grants

Ciena accounts for proceeds from government grants as a reduction of operating expense when there is reasonable assurance that Ciena has complied with the conditions attached to the grant and that the grant proceeds will be received. Grant benefits are recorded to the line item in the Condensed Consolidated Statement of Operations to which the grant activity relates.

Advertising Costs

Advertising Costs

Ciena expenses all advertising costs as incurred.

Legal Costs

Legal Costs

Ciena expenses legal costs associated with litigation defense as incurred.

Share-Based Compensation Expense

Share-Based Compensation Expense

Ciena measures and recognizes compensation expense for share-based awards based on estimated fair values on the date of grant. Ciena estimates the fair value of each option-based award on the date of grant using the Black-Scholes option-pricing model. This model is affected by Ciena's stock price as well as estimates regarding a number of variables, including expected stock price volatility over the expected term of the award and projected employee stock option exercise behaviors. Ciena estimates the fair value of each restricted stock unit award based on the fair value of the underlying common stock on the date of grant. In each case, Ciena only recognizes expense in its Condensed Consolidated Statement of Operations for those stock options or restricted stock units that are ultimately expected to vest. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon its determination of whether it is probable that the performance targets will be achieved. At each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. Ciena uses the straight-line method to record expense for share-based awards with only service-based vesting.

Income Taxes

Income Taxes

Ciena accounts for income taxes using an asset and liability approach that recognizes deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, and for operating loss and tax credit carryforwards. In estimating future tax consequences, Ciena considers all expected future events other than the enactment of changes in tax laws or rates. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. In addition, tax authorities periodically audit Ciena's income tax returns. These audits examine significant tax filing positions, including the timing and amounts of deductions and the allocation of income tax expenses among tax jurisdictions. Ciena is currently under audit in India for 2008 through 2012 and in Canada for 2010 through 2012. Management does not expect the outcome of these audits to have a material adverse effect on Ciena's consolidated financial position, results of operations or cash flows. Ciena's major tax jurisdictions and the earliest open tax years are as follows: United States (2010), United Kingdom (2012), Canada (2009) and India (2008). However, limited adjustments can be made to Federal U.S. tax returns in earlier years in order to reduce net operating loss carryforwards. Ciena classifies interest and penalties related to uncertain tax positions as a component of income tax expense. All of the uncertain tax positions, if recognized, would decrease the effective income tax rate.

Ciena has not provided for U.S. deferred income taxes on the cumulative unremitted earnings of its non-U.S. affiliates, as it plans to indefinitely reinvest cumulative unremitted foreign earnings outside the U.S., and it is not practicable to determine the unrecognized deferred income taxes. These cumulative unremitted foreign earnings relate to ongoing operations in foreign jurisdictions and will be used to fund foreign operations, capital expenditures and any expansion requirements.

Ciena recognizes windfall tax benefits associated with the exercise of stock options or release of restricted stock units directly to stockholders' equity only when realized. A windfall tax benefit occurs when the actual tax benefit realized by Ciena upon an employee's disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that Ciena had recorded. When assessing whether a tax benefit relating to share-based compensation has been realized, Ciena follows the tax law “with-and-without” method. Under the with-and-without method, the windfall is considered realized and recognized for financial statement purposes only when an incremental benefit is provided after considering all other tax benefits including Ciena's net operating losses. The with-and-without method results in the windfall from share-based compensation awards always being effectively the last tax benefit to be considered. Consequently, the windfall attributable to share-based compensation will not be considered realized in instances where Ciena's net operating loss carryover (that is unrelated to windfalls) is sufficient to offset the current year's taxable income before considering the effects of current-year windfalls.

Loss Contingencies

Loss Contingencies

Ciena is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. Ciena considers the likelihood of loss or the incurrence of a liability, as well as Ciena's ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Ciena regularly evaluates current information available to it in order to determine whether any accruals should be adjusted and whether new accruals are required.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying value of Ciena's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair market value due to the relatively short period of time to maturity. For information related to the fair value of Ciena's convertible notes, see Note 13 below.

Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Ciena utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:

• Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 inputs are quoted prices for identical or similar assets or liabilities in less active markets or model-derived valuations in which significant inputs are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

• Level 3 inputs are unobservable inputs based on Ciena's assumptions used to measure assets and liabilities at fair value.

By distinguishing between inputs that are observable in the marketplace, and therefore more objective, and those that are unobservable and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Restructuring

Restructuring

From time to time, Ciena takes actions to better align its workforce, facilities and operating costs with perceived market opportunities, business strategies and changes in market and business conditions. GAAP requires that a liability for the cost associated with an exit or disposal activity be recognized in the period in which the liability is incurred, except for one-time employee termination benefits related to a service period of more than 60 days, which are accrued over the service period.

Foreign Currency

Foreign Currency

Some of Ciena's foreign branch offices and subsidiaries use the U.S. dollar as their functional currency because Ciena, as the U.S. parent entity, exclusively funds the operations of these branch offices and subsidiaries. For those subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and the statement of operations is translated at a monthly average rate. Resulting translation adjustments are recorded directly to a separate component of stockholders' equity. Where the monetary assets and liabilities are transacted in a currency other than the entity's functional currency, re-measurement adjustments are recorded in interest and other income (loss), net on the Condensed Consolidated Statement of Operations.

Derivatives

Derivatives

Ciena's 4.0% convertible senior notes due March 15, 2015 (the "2015 Notes") include a redemption feature that is accounted for as a separate embedded derivative. The embedded redemption feature is recorded at fair value on a recurring basis, and these changes are included in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. Interest and other income (loss), net reflects an increase in fair value of $0.4 million for the six months ended April 30, 2013 and a reduction in fair value of $2.6 million for the six months ended April 30, 2014.

From time to time, Ciena uses foreign currency forward contracts to reduce variability in certain forecasted non-U.S.-dollar denominated cash flows. Generally, these derivatives have maturities of 12 months or less and are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, Ciena assesses whether the forward contract has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The effective portion of the derivative's net gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and upon the occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Condensed Consolidated Statement of Operations to which the hedged transaction relates. Any net gain or loss associated with the ineffectiveness of the hedging instrument is reported in interest and other income (loss), net.

From time to time, Ciena uses foreign currency forwards to hedge certain balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net on the Condensed Consolidated Statement of Operations.

Computation of Net Income (Loss) per Share

Computation of Net Income (Loss) per Share

Ciena calculates basic earnings per share ("EPS") by dividing earnings attributable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS includes other potential dilutive shares that would be outstanding if securities or contracts to issue common stock were exercised or converted into common stock. Ciena uses a dual presentation of basic and diluted EPS on the face of its income statement.

Software Development Costs

Software Development Costs

Ciena develops software for sale to its customers. GAAP requires the capitalization of certain software development costs that are incurred subsequent to the date technological feasibility is established and prior to the date the product is generally available for sale. The capitalized cost is then amortized straight-line over the estimated life of the product. Ciena defines technological feasibility as being attained at the time a working model is completed. To date, the period between Ciena achieving technological feasibility and the general availability of such software has been short, and software development costs qualifying for capitalization have been insignificant. Accordingly, Ciena has not capitalized any software development costs.

Newly Issued Accounting Standards

Newly Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board ("FASB") issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update was effective for Ciena beginning in the first quarter of fiscal 2014. Ciena has determined that reclassifications from other comprehensive income to net income are immaterial for separate financial statement presentation.

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) which provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. The standard will be effective for Ciena beginning in the first quarter of fiscal 2018. Ciena is currently evaluating the impact of the adoption of this accounting standard update on its condensed consolidated financial statements.

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Other Balance Sheet Details (Details) (USD $)	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Oct. 31, 2013
Other long-term assets
Maintenance spares inventory, net	$ 56,090,000		$ 61,305,000
Deferred debt issuance costs, net	13,302,000		15,677,000
Embedded redemption feature	0		2,740,000
Restricted cash	141,000		2,053,000
Other	4,560,000		4,605,000
Total	74,093,000		86,380,000
Other Balance Sheet Details (Textuals) [Abstract]
Amortization of debt issuance costs included in interest expense	$ 2,400,000	$ 3,000,000

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Short-term and Long-term Investments (Details 1) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014
Legal maturities of debt investments
Amortized Cost, Less than one year	$ 90,033
Amortized Cost, Due in 1-2 years	14,997
Amortized Cost, Total	105,030
Estimated Fair Value, Less than one year	90,049
Estimated Fair Value, Due in 1-2 years	15,042
Estimated Fair Value	$ 105,091

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Segment and Entity Wide Disclosures (Tables)

6 Months Ended

Apr. 30, 2014

Segment Reporting [Abstract]

Segment revenue

The table below (in thousands) sets forth Ciena’s segment revenue for the respective periods:

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
Revenue:
Converged Packet Optical	$	294,325	$	356,840	$	534,285	$	690,241
Packet Networking	54,190		66,526		100,027		118,235
Optical Transport	57,371		29,616		114,968		69,713
Software and Services	101,826		107,079		211,525		215,575
Consolidated revenue	$	507,712	$	560,061	$	960,805	$	1,093,764

Segment profit (loss) and the reconciliation to consolidated net income (loss)

The table below (in thousands) sets forth Ciena’s segment profit and the reconciliation to consolidated net loss during the respective periods indicated:

	Quarter Ended April 30,						Six Months Ended April 30,
	2013			2014			2013			2014
Segment profit:
Converged Packet Optical	$	57,528		$	96,581		$	104,646		$	175,279
Packet Networking	2,556			8,196			7,639			8,581
Optical Transport	21,413			4,709			42,000			20,359
Software and Services	27,229			24,713			61,111			54,334
Total segment profit	108,726			134,199			215,396			258,553
Less: non-performance operating expenses
Selling and marketing	74,475			83,662			141,063			162,010
General and administrative	30,883			31,882			59,091			61,979
Amortization of intangible assets	12,439			11,493			24,892			23,932
Restructuring costs	1,509			—			6,539			115
Add: other non-performance financial items
Interest expense and other income (loss), net	(14,108		)	(12,925		)	(24,977		)	(29,951		)
Loss on extinguishment of debt	—			—			(28,630		)	—
Less: Provision for income taxes	2,391			4,395			4,607			6,660
Consolidated net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)

Ciena's geographic distribution of revenue and long-lived assets

For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
United States	$	287,572	$	323,927	$	551,807	$	641,377
International	220,140		236,134		408,998		452,387
Total	$	507,712	$	560,061	$	960,805	$	1,093,764

For the periods below, Ciena's geographic distribution of equipment, furniture and fixtures was as follows (in thousands):

	October 31, 2013		April 30, 2014
United States	$	64,132	$	64,415
Canada	43,772		42,978
Other International	11,825		12,483
Total	$	119,729	$	119,876

Customers accounting for at least 10% of Ciena's revenue

For the periods below, customers accounting for at least 10% of Ciena’s revenue were as follows (in thousands):

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
Company A	$	101,531	$	120,582	$	173,210	$	221,044
Company B	57,293		n/a		105,356		n/a
Total	$	158,824	$	120,582	$	278,566	$	221,044

________________________________

n/a Denotes revenue representing less than 10% of total revenue for the period

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Other Balance Sheet Details (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance	$ 56,303	$ 55,132
Provisions	12,424	11,060
Settlements	(12,560)	(11,463)
Balance at end of period	$ 56,167	$ 54,729

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Commitments and Contingencies (Details) (Ontario Grant [Member], CAD)	1 Months Ended	6 Months Ended	42 Months Ended
	Jun. 30, 2011	Apr. 30, 2014	Apr. 30, 2014
Ontario Grant [Member]
Gain Contingencies [Line Items]
Grant amount	25,000,000
Grant period	November 1, 2010 to October 31, 2015
Annual disbursements	5,000,000
Benefit recorded to date		3,600,000	20,000,000
Grants receivable		3,600,000	3,600,000

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Share-Based Compensation Expense (Details 2) (Restricted Stock Units (RSUs) [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Oct. 31, 2013
Restricted Stock Units (RSUs) [Member]
Summary of Restricted Stock Unit Activity
Balance at October 31, 2013	4,419
Granted	1,745
Vested	(1,252)
Canceled or forfeited	(99)
Balance at April 30, 2014	4,813
Weighted Average Grant Date Fair Value [Abstract]
Weighted Average Grant Date Fair Value Per Share, Beginning Balance (in dollars per share)	$ 15.33
Weighted Average Grant Date Fair Value Per Share, Ending Balance (in dollars per share)	$ 17.67
Aggregate Fair Value	$ 93,052	$ 102,745

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Prepaid Expenses and Other (Details) (USD $)	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Oct. 31, 2013
Prepaid expenses and other
Prepaid VAT and other taxes	$ 106,790,000		$ 101,072,000
Deferred deployment expense	25,123,000		23,190,000
Product demonstration equipment, net	43,184,000		33,382,000
Prepaid expenses	15,244,000		16,963,000
Embedded redemption feature	190,000		0
Other non-trade receivables	16,696,000		11,996,000
Restricted cash	52,000		52,000
Prepaid expenses and other	207,279,000		186,655,000
Depreciation of product demonstration equipment	$ 4,200,000	$ 3,500,000

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Restructuring Costs

6 Months Ended

Apr. 30, 2014

Restructuring and Related Activities [Abstract]

RESTRUCTURING COSTS

RESTRUCTURING COSTS

Ciena has undertaken a number of restructuring activities intended to reduce expense and better align its workforce and costs with market opportunities, product development and business strategies. The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the six months ended April 30, 2014 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2013	$	80		$	1,936		$	2,016
Additional liability recorded	106			9			115
Cash payments	(136		)	(178		)	(314		)
Balance at April 30, 2014	$	50		$	1,767		$	1,817
Current restructuring liabilities	$	50		$	627		$	677
Non-current restructuring liabilities	$	—		$	1,140		$	1,140

The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the six months ended April 30, 2013 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2012	$	1,449		$	3,600		$	5,049
Additional liability recorded	4,916			1,623			6,539
Non-cash disposal	—			(735		)	(735		)
Cash payments	(5,733		)	(2,153		)	(7,886		)
Balance at April 30, 2013	$	632		$	2,335		$	2,967
Current restructuring liabilities	$	632		$	1,606		$	2,238
Non-current restructuring liabilities	$	—		$	729		$	729

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Share-Based Compensation Expense (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Share-based compensation expense
Share-based compensation expense capitalized in inventory, net	$ 53	$ (24)	$ 218	$ (24)
Total share-based compensation	12,051	9,827	23,443	18,147
Cost of Sales [Member]
Share-based compensation expense
Share-based compensation expense	1,309	1,121	2,395	2,109
Product costs [Member]
Share-based compensation expense
Share-based compensation expense	741	686	1,247	1,247
Service costs [Member]
Share-based compensation expense
Share-based compensation expense	568	435	1,148	862
Operating Expense [Member]
Share-based compensation expense
Share-based compensation expense	10,689	8,730	20,830	16,062
Research and development [Member]
Share-based compensation expense
Share-based compensation expense	2,782	2,204	5,354	4,237
Sales and marketing [Member]
Share-based compensation expense
Share-based compensation expense	4,246	3,382	8,309	6,125
General and administrative [Member]
Share-based compensation expense
Share-based compensation expense	$ 3,661	$ 3,144	$ 7,167	$ 5,700

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Apr. 30, 2014
Assets:
U.S. government obligations	$ 105,091
Fair Value, Measurements, Recurring [Member] | Total [Member]
Assets:
Money market funds	226,925
U.S. government obligations	75,100
Commercial paper	49,989
Foreign currency forward contracts	296
Embedded redemption feature	190
Total assets measured at fair value	352,500
Liabilities:
Foreign currency forward contracts	3,548
Total liabilities measured at fair value	3,548
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets:
Money market funds	226,925
U.S. government obligations	0
Commercial paper	0
Foreign currency forward contracts	0
Embedded redemption feature	0
Total assets measured at fair value	226,925
Liabilities:
Foreign currency forward contracts	0
Total liabilities measured at fair value	0
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Assets:
Money market funds	0
U.S. government obligations	75,100
Commercial paper	49,989
Foreign currency forward contracts	296
Embedded redemption feature	0
Total assets measured at fair value	125,385
Liabilities:
Foreign currency forward contracts	3,548
Total liabilities measured at fair value	3,548
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Assets:
Money market funds	0
U.S. government obligations	0
Commercial paper	0
Foreign currency forward contracts	0
Embedded redemption feature	190
Total assets measured at fair value	190
Liabilities:
Foreign currency forward contracts	0
Total liabilities measured at fair value	0
Reconciliation of changes in Level 3 fair value measurements
Balance at October 31, 2013	2,740
Issuances	0
Settlements	0
Changes in unrealized gain (loss)	(2,550)
Transfers into Level 3	0
Transfers out of Level 3	0
Balance at April 30, 2014	$ 190

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Inventories (Tables)

6 Months Ended

Apr. 30, 2014

Inventory Disclosure [Abstract]

Inventories

As of the dates indicated, inventories are comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Raw materials	$	53,274		$	56,689
Work-in-process	7,773			7,919
Finished goods	153,855			181,020
Deferred cost of goods sold	75,764			95,783
	290,666			341,411
Provision for excess and obsolescence	(41,563		)	(47,459		)
	$	249,103		$	293,952

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Fair Value Measurements (Tables)

6 Months Ended

Apr. 30, 2014

Fair Value Disclosures [Abstract]

Summary of the fair value of assets recorded on a recurring basis

As of the date indicated, the following table summarizes the fair value of assets and liabilities that are recorded at fair value on a recurring basis (in thousands):

	April 30, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	226,925	$	—	$	—	$	226,925
U.S. government obligations	—		75,100		—		75,100
Commercial paper	—		49,989		—		49,989
Foreign currency forward contracts	—		296		—		296
Embedded redemption feature	—		—		190		190
Total assets measured at fair value	$	226,925	$	125,385	$	190	$	352,500
Liabilities:
Foreign currency forward contracts	$	—	$	3,548	$	—	$	3,548
Total liabilities measured at fair value	$	—	$	3,548	$	—	$	3,548

Assets are presented on Ciena's Condensed Consolidated Balance Sheet

As of the date indicated, the assets and liabilities above were presented on Ciena’s Condensed Consolidated Balance Sheet as follows (in thousands):

	April 30, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	226,782	$	19,998	$	—	$	246,780
Short-term investments	—		90,049		—		90,049
Prepaid expenses and other	52		296		190		538
Long-term investments	—		15,042		—		15,042
Other long-term assets	91		—		—		91
Total assets measured at fair value	$	226,925	$	125,385	$	190	$	352,500
Liabilities:
Accrued liabilities	$	—	$	3,548	$	—	$	3,548
Total liabilities measured at fair value	$	—	$	3,548	$	—	$	3,548

Reconciliation of changes in Level 3 fair value measurements

As of the dates indicated, the following table sets forth, in thousands, the reconciliation of changes in fair value measurements of Level 3 assets:

	Level 3
Balance at October 31, 2013	$	2,740
Issuances	—
Settlements	—
Changes in unrealized gain (loss)	(2,550		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at April 30, 2014	$	190

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Credit Facility (Details) (USD $)	Oct. 31, 2012	Apr. 30, 2014 Letter of Credit [Member]	Apr. 30, 2014 Line of Credit [Member]	Apr. 30, 2014 4.0% Convertible Senior Notes due March 15, 2015 [Member]	Apr. 30, 2014 4.0% Convertible Senior Notes due March 15, 2015 [Member] Convertible Notes Payable [Member]
Line of Credit Facility [Line Items]
Credit facility, current borrowing capacity	$ 150,000,000
Interest rate on convertible notes				4.00%	4.00%
Letters of credit collateralized by the credit facility		58,700,000
Borrowings outstanding			$ 0

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Fair Value Measurements (Details 1) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Apr. 30, 2014
Total [Member]
Assets:
Assets measured at fair value	$ 352,500
Liabilities:
Liabilities measured at fair value	3,548
Level 1 [Member]
Assets:
Assets measured at fair value	226,925
Liabilities:
Liabilities measured at fair value	0
Level 2 [Member]
Assets:
Assets measured at fair value	125,385
Liabilities:
Liabilities measured at fair value	3,548
Level 3 [Member]
Assets:
Assets measured at fair value	190
Liabilities:
Liabilities measured at fair value	0
Cash and Cash Equivalents [Member] | Total [Member]
Assets:
Assets measured at fair value	246,780
Cash and Cash Equivalents [Member] | Level 1 [Member]
Assets:
Assets measured at fair value	226,782
Cash and Cash Equivalents [Member] | Level 2 [Member]
Assets:
Assets measured at fair value	19,998
Cash and Cash Equivalents [Member] | Level 3 [Member]
Assets:
Assets measured at fair value	0
Short-term Investments [Member] | Total [Member]
Assets:
Assets measured at fair value	90,049
Short-term Investments [Member] | Level 1 [Member]
Assets:
Assets measured at fair value	0
Short-term Investments [Member] | Level 2 [Member]
Assets:
Assets measured at fair value	90,049
Short-term Investments [Member] | Level 3 [Member]
Assets:
Assets measured at fair value	0
Prepaid Expenses and Other Current Assets [Member] | Total [Member]
Assets:
Assets measured at fair value	538
Prepaid Expenses and Other Current Assets [Member] | Level 1 [Member]
Assets:
Assets measured at fair value	52
Prepaid Expenses and Other Current Assets [Member] | Level 2 [Member]
Assets:
Assets measured at fair value	296
Prepaid Expenses and Other Current Assets [Member] | Level 3 [Member]
Assets:
Assets measured at fair value	190
Marketable Securities Noncurrent [Member] | Total [Member]
Assets:
Assets measured at fair value	15,042
Marketable Securities Noncurrent [Member] | Level 1 [Member]
Assets:
Assets measured at fair value	0
Marketable Securities Noncurrent [Member] | Level 2 [Member]
Assets:
Assets measured at fair value	15,042
Marketable Securities Noncurrent [Member] | Level 3 [Member]
Assets:
Assets measured at fair value	0
Other Noncurrent Assets [Member] | Total [Member]
Assets:
Assets measured at fair value	91
Other Noncurrent Assets [Member] | Level 1 [Member]
Assets:
Assets measured at fair value	91
Other Noncurrent Assets [Member] | Level 2 [Member]
Assets:
Assets measured at fair value	0
Other Noncurrent Assets [Member] | Level 3 [Member]
Assets:
Assets measured at fair value	0
Accrued Liabilities [Member] | Total [Member]
Liabilities:
Liabilities measured at fair value	3,548
Accrued Liabilities [Member] | Level 1 [Member]
Liabilities:
Liabilities measured at fair value	0
Accrued Liabilities [Member] | Level 2 [Member]
Liabilities:
Liabilities measured at fair value	3,548
Accrued Liabilities [Member] | Level 3 [Member]
Liabilities:
Liabilities measured at fair value	$ 0

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Prepaid Expenses and Other (Tables)

6 Months Ended

Apr. 30, 2014

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid expenses and other

As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Prepaid VAT and other taxes	$	101,072	$	106,790
Deferred deployment expense	23,190		25,123
Product demonstration equipment, net	33,382		43,184
Prepaid expenses	16,963		15,244
Embedded redemption feature	—		190
Other non-trade receivables	11,996		16,696
Restricted cash	52		52
	$	186,655	$	207,279

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Equipment, Furniture and Fixtures (Tables)

6 Months Ended

Apr. 30, 2014

Property, Plant and Equipment [Abstract]

Equipment, furniture and fixtures

As of the dates indicated, equipment, furniture and fixtures are comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Equipment, furniture and fixtures	$	364,574		$	379,569
Leasehold improvements	46,247			46,442
	410,821			426,011
Accumulated depreciation and amortization	(291,092		)	(306,135		)
	$	119,729		$	119,876

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Significant Accounting Policies

6 Months Ended

Apr. 30, 2014

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements and related disclosures in conformity with accounting principles generally

accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for selling prices for multiple element arrangements, share-based compensation, convertible notes payable valuations, bad debts, valuation of inventories and investments, recoverability of intangible assets, other long-lived assets, income taxes, warranty obligations, restructuring liabilities, derivatives, incentive compensation, contingencies and litigation. Ciena bases its estimates on historical experience and assumptions that it believes are reasonable. Actual results may differ materially from management’s estimates.

Cash and Cash Equivalents

Ciena considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Restricted cash collateralizing letters of credit is included in other current assets and other long-term assets depending upon the duration of the restriction.

Investments

Ciena's investments are classified as available-for-sale and are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Ciena recognizes losses when it determines that declines in the fair value of its investments below their cost basis are other-than-temporary. In determining whether a decline in fair value is other-than-temporary, Ciena considers various factors including market price (when available), investment ratings, the financial condition and near-term prospects of the investee, the length of time and the extent to which the fair value has been less than Ciena's cost basis, and its intent and ability to hold the investment until maturity or for a period of time sufficient to allow for any anticipated recovery in market value. Ciena considers all marketable debt securities that it expects to convert to cash within one year or less to be short-term investments, with all others considered to be long-term investments.

Inventories

Inventories are stated at the lower of cost or market, with cost computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Ciena records a provision for excess and obsolete inventory when an impairment has been identified.

Segment Reporting

Ciena's chief operating decision maker, its chief executive officer, evaluates the company's performance and allocates resources based on multiple factors, including measures of segment profit (loss). Operating segments are defined as components of an enterprise that engage in business activities that may earn revenue and incur expense, for which discrete financial information is available, and for which such information is evaluated regularly by the chief operating decision maker for purposes of allocating resources and assessing performance. Ciena considers the following to be its operating segments for reporting purposes: (i) Converged Packet Optical, (ii) Packet Networking, (iii) Optical Transport, and (iv) Software and Services. See Note 17 below.

Long-lived Assets

Long-lived assets include: equipment, furniture and fixtures; intangible assets; and maintenance spares. Ciena tests long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the asset's carrying amount is not recoverable from its undiscounted cash flows. An impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. Ciena's long-lived assets are assigned to asset groups which represent the lowest level for which cash flows can be identified.

Equipment, Furniture and Fixtures and Internal Use Software

Equipment, furniture and fixtures are recorded at cost. Depreciation and amortization are computed using the straight-line method over useful lives of two to five years for equipment, furniture and fixtures, and the shorter of useful life or lease term for leasehold improvements.

Qualifying internal use software and website development costs incurred during the application development stage, which consist primarily of outside services and purchased software license costs, are capitalized and amortized straight-line over the estimated useful lives of two to five years.

Intangible Assets

Ciena has recorded finite-lived intangible assets as a result of several acquisitions. Finite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the expected economic lives of the respective assets, up to seven years, which approximates the use of intangible assets.

Maintenance Spares

Maintenance spares are recorded at cost. Spares usage cost is expensed ratably over four years.

Concentrations

Substantially all of Ciena's cash and cash equivalents are maintained at a small number of major U.S. financial institutions. The majority of Ciena's cash equivalents consist of money market funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. Because these deposits generally may be redeemed upon demand, management believes that they bear minimal risk.

Historically, a significant percentage of Ciena's revenue has been concentrated among sales to a small number of large communications service providers. Consolidation among Ciena's customers has increased this concentration. Consequently, Ciena's accounts receivable are concentrated among these customers. See Note 17 below.

Additionally, Ciena's access to certain materials or components is dependent upon sole or limited source suppliers. The inability of any of these suppliers to fulfill Ciena's supply requirements, or significant changes in supply cost, could affect future results. Ciena relies on a small number of contract manufacturers to perform the majority of the manufacturing for its products. If Ciena cannot effectively manage these manufacturers and forecast future demand, or if these manufacturers fail to deliver products or components on time, Ciena's business and results of operations may suffer.

Revenue Recognition

Ciena recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectibility is reasonably assured. Customer purchase agreements and customer purchase orders are generally used to determine the existence of an arrangement. Shipping documents and evidence of customer acceptance, when applicable, are used to verify delivery or services rendered. Ciena assesses whether the price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Ciena assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer's payment history. Revenue for maintenance services is generally deferred and recognized ratably over the period during which the services are performed. Shipping and handling fees billed to customers are included in revenue, with the associated expenses included in product cost of goods sold.

Ciena applies the percentage-of-completion method to long-term arrangements where it is required to undertake significant production, customizations or modification engineering, and reasonable and reliable estimates of revenue and cost are available. Utilizing the percentage-of-completion method, Ciena recognizes revenue based on the ratio of actual costs incurred to date to total estimated costs expected to be incurred. In instances that do not meet the percentage-of-completion method criteria, recognition of revenue is deferred until there are no uncertainties regarding customer acceptance. Unbilled percentage- of-completion revenues recognized are accumulated in the contracts in progress account included in accounts receivable, net. Billings in excess of revenues recognized to date on these contracts are recorded within deferred revenue.

Software revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. In instances where final acceptance criteria of the software are specified by the customer, revenue is deferred until there are no uncertainties regarding customer acceptance.

Ciena limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or refund privileges.

Revenue for multiple element arrangements is allocated to each unit of accounting based on the relative selling price of each delivered element, with revenue recognized for each delivered element when the revenue recognition criteria are met. Ciena determines the selling price for each deliverable based upon the selling price hierarchy for multiple-deliverable arrangements. Under this hierarchy, Ciena uses vendor-specific objective evidence ("VSOE") of selling price, if it exists, or third party evidence ("TPE") of selling price if VSOE does not exist. If neither VSOE nor TPE of selling price exists for a deliverable, Ciena uses its best estimate of selling price ("BESP") for that deliverable. For multiple element software arrangements where VSOE of undelivered maintenance does not exist, revenue for the entire arrangement is recognized over the maintenance term.

VSOE, when determinable, is established based on Ciena's pricing and discounting practices for the specific product or service when sold separately. In determining whether VSOE exists, Ciena requires that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range. Ciena has been unable to establish TPE of selling price because its go-to-market strategy differs from that of others in its markets, and the extent of customization and differentiated features and functions varies among comparable products or services from its peers. Ciena determines BESP based upon management-approved pricing guidelines, which consider multiple factors including the type of product or service, gross margin objectives, competitive and market conditions, and the go-to-market strategy, all of which can affect pricing practices.

Warranty Accruals

Ciena provides for the estimated costs to fulfill customer warranty obligations upon recognition of the related revenue. Estimated warranty costs include estimates for material costs, technical support labor costs and associated overhead. Warranty is included in cost of goods sold and is determined based upon actual warranty cost experience, estimates of component failure rates and management's industry experience. Ciena's sales contracts do not permit the right of return of the product by the customer after the product has been accepted.

Accounts Receivable, Net

Ciena's allowance for doubtful accounts is based on its assessment, on a specific identification basis, of the collectibility of customer accounts. Ciena performs ongoing credit evaluations of its customers and generally has not required collateral or other forms of security from its customers. In determining the appropriate balance for Ciena's allowance for doubtful accounts, management considers each individual customer account receivable in order to determine collectibility. In doing so, management considers creditworthiness, payment history, account activity and communication with the customer. If a customer's financial condition changes, Ciena may be required to record an allowance for doubtful accounts, which would negatively affect its results of operations.

Research and Development

Ciena charges all research and development costs to expense as incurred. Types of expense incurred in research and development include employee compensation, cost of prototype equipment, consulting and third party services, depreciation, facility costs and information technology.

Government Grants

Ciena accounts for proceeds from government grants as a reduction of operating expense when there is reasonable assurance that Ciena has complied with the conditions attached to the grant and that the grant proceeds will be received. Grant benefits are recorded to the line item in the Condensed Consolidated Statement of Operations to which the grant activity relates. See Note 18 below.

Advertising Costs

Ciena expenses all advertising costs as incurred.

Legal Costs

Ciena expenses legal costs associated with litigation defense as incurred.

Share-Based Compensation Expense

Ciena measures and recognizes compensation expense for share-based awards based on estimated fair values on the date of grant. Ciena estimates the fair value of each option-based award on the date of grant using the Black-Scholes option-pricing model. This model is affected by Ciena's stock price as well as estimates regarding a number of variables, including expected stock price volatility over the expected term of the award and projected employee stock option exercise behaviors. Ciena estimates the fair value of each restricted stock unit award based on the fair value of the underlying common stock on the date of grant. In each case, Ciena only recognizes expense in its Condensed Consolidated Statement of Operations for those stock options or restricted stock units that are ultimately expected to vest. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon its determination of whether it is probable that the performance targets will be achieved. At each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. Ciena uses the straight-line method to record expense for share-based awards with only service-based vesting. See Note 16 below.

Income Taxes

Ciena accounts for income taxes using an asset and liability approach that recognizes deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, and for operating loss and tax credit carryforwards. In estimating future tax consequences, Ciena considers all expected future events other than the enactment of changes in tax laws or rates. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

In the ordinary course of business, transactions occur for which the ultimate outcome may be uncertain. In addition, tax authorities periodically audit Ciena's income tax returns. These audits examine significant tax filing positions, including the timing and amounts of deductions and the allocation of income tax expenses among tax jurisdictions. Ciena is currently under audit in India for 2008 through 2012 and in Canada for 2010 through 2012. Management does not expect the outcome of these audits to have a material adverse effect on Ciena's consolidated financial position, results of operations or cash flows. Ciena's major tax jurisdictions and the earliest open tax years are as follows: United States (2010), United Kingdom (2012), Canada (2009) and India (2008). However, limited adjustments can be made to Federal U.S. tax returns in earlier years in order to reduce net operating loss carryforwards. Ciena classifies interest and penalties related to uncertain tax positions as a component of income tax expense. All of the uncertain tax positions, if recognized, would decrease the effective income tax rate.

Ciena has not provided for U.S. deferred income taxes on the cumulative unremitted earnings of its non-U.S. affiliates, as it plans to indefinitely reinvest cumulative unremitted foreign earnings outside the U.S., and it is not practicable to determine the unrecognized deferred income taxes. These cumulative unremitted foreign earnings relate to ongoing operations in foreign jurisdictions and will be used to fund foreign operations, capital expenditures and any expansion requirements.

Ciena recognizes windfall tax benefits associated with the exercise of stock options or release of restricted stock units directly to stockholders' equity only when realized. A windfall tax benefit occurs when the actual tax benefit realized by Ciena upon an employee's disposition of a share-based award exceeds the deferred tax asset, if any, associated with the award that Ciena had recorded. When assessing whether a tax benefit relating to share-based compensation has been realized, Ciena follows the tax law “with-and-without” method. Under the with-and-without method, the windfall is considered realized and recognized for financial statement purposes only when an incremental benefit is provided after considering all other tax benefits including Ciena's net operating losses. The with-and-without method results in the windfall from share-based compensation awards always being effectively the last tax benefit to be considered. Consequently, the windfall attributable to share-based compensation will not be considered realized in instances where Ciena's net operating loss carryover (that is unrelated to windfalls) is sufficient to offset the current year's taxable income before considering the effects of current-year windfalls.

Loss Contingencies

Ciena is subject to the possibility of various losses arising in the ordinary course of business. These may relate to disputes, litigation and other legal actions. Ciena considers the likelihood of loss or the incurrence of a liability, as well as Ciena's ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Ciena regularly evaluates current information available to it in order to determine whether any accruals should be adjusted and whether new accruals are required.

Fair Value of Financial Instruments

The carrying value of Ciena's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair market value due to the relatively short period of time to maturity. For information related to the fair value of Ciena's convertible notes, see Note 13 below.

Fair value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Ciena utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy prioritizes the inputs into three broad levels as follows:

• Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 inputs are quoted prices for identical or similar assets or liabilities in less active markets or model-derived valuations in which significant inputs are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

• Level 3 inputs are unobservable inputs based on Ciena's assumptions used to measure assets and liabilities at fair value.

By distinguishing between inputs that are observable in the marketplace, and therefore more objective, and those that are unobservable and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements. A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Restructuring

From time to time, Ciena takes actions to better align its workforce, facilities and operating costs with perceived market opportunities, business strategies and changes in market and business conditions. GAAP requires that a liability for the cost associated with an exit or disposal activity be recognized in the period in which the liability is incurred, except for one-time employee termination benefits related to a service period of more than 60 days, which are accrued over the service period. See Note 3 below.

Foreign Currency

Some of Ciena's foreign branch offices and subsidiaries use the U.S. dollar as their functional currency because Ciena, as the U.S. parent entity, exclusively funds the operations of these branch offices and subsidiaries. For those subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and the statement of operations is translated at a monthly average rate. Resulting translation adjustments are recorded directly to a separate component of stockholders' equity. Where the monetary assets and liabilities are transacted in a currency other than the entity's functional currency, re-measurement adjustments are recorded in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. Interest and other income (loss), net reflects a net loss on foreign currency re-measurement and exchange rate changes of $3.0 million for the six months ended April 30, 2013 and a net gain of $5.3 million for the six months ended April 30, 2014.

Derivatives

Ciena's 4.0% convertible senior notes due March 15, 2015 (the "2015 Notes") include a redemption feature that is accounted for as a separate embedded derivative. The embedded redemption feature is recorded at fair value on a recurring basis, and these changes are included in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. Interest and other income (loss), net reflects an increase in fair value of $0.4 million for the six months ended April 30, 2013 and a reduction in fair value of $2.6 million for the six months ended April 30, 2014.

From time to time, Ciena uses foreign currency forward contracts to reduce variability in certain forecasted non-U.S.-dollar denominated cash flows. Generally, these derivatives have maturities of 12 months or less and are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, Ciena assesses whether the forward contract has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The effective portion of the derivative's net gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and upon the occurrence of the forecasted transaction, is subsequently reclassified to the line item in the Condensed Consolidated Statement of Operations to which the hedged transaction relates. Any net gain or loss associated with the ineffectiveness of the hedging instrument is reported in interest and other income (loss), net.

From time to time, Ciena uses foreign currency forwards to hedge certain balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net on the Condensed Consolidated Statement of Operations. Interest and other income (loss), net reflects losses of $0.1 million and $10.2 million related to foreign currency forward contracts for the six months ended April 30, 2013 and 2014, respectively. See Note 12 below.

Ciena records derivative instruments in the Condensed Consolidated Statement of Cash Flows within operating, investing, or financing activities consistent with the cash flows of the hedged items.

Computation of Net Income (Loss) per Share

Ciena calculates basic earnings per share ("EPS") by dividing earnings attributable to common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS includes other potential dilutive shares that would be outstanding if securities or contracts to issue common stock were exercised or converted into common stock. Ciena uses a dual presentation of basic and diluted EPS on the face of its income statement. A reconciliation of the numerator and denominator used for the basic and diluted EPS computations is set forth in Note 15 below.

Software Development Costs

Ciena develops software for sale to its customers. GAAP requires the capitalization of certain software development costs that are incurred subsequent to the date technological feasibility is established and prior to the date the product is generally available for sale. The capitalized cost is then amortized straight-line over the estimated life of the product. Ciena defines technological feasibility as being attained at the time a working model is completed. To date, the period between Ciena achieving technological feasibility and the general availability of such software has been short, and software development costs qualifying for capitalization have been insignificant. Accordingly, Ciena has not capitalized any software development costs.

Newly Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board ("FASB") issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update was effective for Ciena beginning in the first quarter of fiscal 2014. Ciena has determined that reclassifications from other comprehensive income to net income are immaterial for separate financial statement presentation.

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) which provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. The standard will be effective for Ciena beginning in the first quarter of fiscal 2018. Ciena is currently evaluating the impact of the adoption of this accounting standard update on its condensed consolidated financial statements.

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Other Intangible Assets (Tables)

6 Months Ended

Apr. 30, 2014

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible assets

As of the dates indicated, other intangible assets are comprised of the following (in thousands):

	October 31, 2013							April 30, 2014
	Gross Intangible		Accumulated Amortization			Net Intangible		Gross Intangible		Accumulated Amortization			Net Intangible
Developed technology	$	417,833	$	(321,645	)	$	96,188	$	417,833	$	(338,428	)	$	79,405
Patents and licenses	46,538		(45,744		)	794		46,538		(45,826		)	712
Customer relationships, covenants not to compete, outstanding purchase orders and contracts	323,573		(234,727		)	88,846		323,573		(248,573		)	75,000
Total other intangible assets	$	787,944	$	(602,116	)	$	185,828	$	787,944	$	(632,827	)	$	155,117

Expected future amortization of finite-lived intangible assets

Expected future amortization of finite-lived other intangible assets for the fiscal years indicated is as follows (in thousands):

Period ended October 31,
2014 (remaining six months)	$	26,439
2015	52,879
2016	52,879
2017	22,783
2018	137
	$	155,117

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Restructuring Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013	Oct. 31, 2013
Activity and balance of the restructuring liability accounts
Balance at beginning of period			$ 2,016	$ 5,049
Additional liability recorded	0	1,509	115	6,539
Non-cash disposal				(735)
Cash payments			(314)	(7,886)
Balance at end of period	1,817	2,967	1,817	2,967
Current restructuring liabilities	677	2,238	677	2,238	674
Non-current restructuring liabilities	1,140	729	1,140	729
Workforce reduction [Member]
Activity and balance of the restructuring liability accounts
Balance at beginning of period			80	1,449
Additional liability recorded			106	4,916
Non-cash disposal				0
Cash payments			(136)	(5,733)
Balance at end of period	50	632	50	632
Current restructuring liabilities	50	632	50	632
Non-current restructuring liabilities	0	0	0	0
Consolidation of excess facilities [Member]
Activity and balance of the restructuring liability accounts
Balance at beginning of period			1,936	3,600
Additional liability recorded			9	1,623
Non-cash disposal				(735)
Cash payments			(178)	(2,153)
Balance at end of period	1,767	2,335	1,767	2,335
Current restructuring liabilities	627	1,606	627	1,606
Non-current restructuring liabilities	$ 1,140	$ 729	$ 1,140	$ 729

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Other Balance Sheet Details (Details 3) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Oct. 31, 2013
Deferred revenue
Total	$ 142,293	$ 112,170
Less current portion	(118,473)	(88,550)
Long-term deferred revenue	23,820	23,620
Products [Member]
Deferred revenue
Total	64,326	36,671
Services [Member]
Deferred revenue
Total	$ 77,967	$ 75,499

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Revenue:
Products	$ 460,821	$ 413,217	$ 893,762	$ 766,274
Services	99,240	94,495	200,002	194,531
Total revenue	560,061	507,712	1,093,764	960,805
Cost of goods sold:
Products	257,632	239,441	502,848	435,962
Services	64,738	58,758	127,374	119,535
Total cost of goods sold	322,370	298,199	630,222	555,497
Gross profit	237,691	209,513	463,542	405,308
Operating expenses:
Research and development	103,492	100,787	204,989	189,912
Selling and marketing	83,662	74,475	162,010	141,063
General and administrative	31,882	30,883	61,979	59,091
Amortization of intangible assets	11,493	12,439	23,932	24,892
Restructuring costs	0	1,509	115	6,539
Total operating expenses	230,529	220,093	453,025	421,497
Income (loss) from operations	7,162	(10,580)	10,517	(16,189)
Interest and other income (loss), net	(1,905)	(2,716)	(7,903)	(2,853)
Interest expense	(11,020)	(11,392)	(22,048)	(22,124)
Loss on extinguishment of debt	0	0	0	(28,630)
Loss before income taxes	(5,763)	(24,688)	(19,434)	(69,796)
Provision for income taxes	4,395	2,391	6,660	4,607
Net loss	$ (10,158)	$ (27,079)	$ (26,094)	$ (74,403)
Basic net loss per common share (in dollars per share)	$ (0.10)	$ (0.27)	$ (0.25)	$ (0.73)
Diluted net loss per potential common share (in dollars per share)	$ (0.10)	$ (0.27)	$ (0.25)	$ (0.73)
Weighted average basic common shares outstanding (in shares)	105,451	101,913	104,977	101,560
Weighted average dilutive potential common shares outstanding (in shares)	105,451	101,913	104,977	101,560

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Accounts Receivable (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Apr. 30, 2014	Oct. 31, 2013
Concentration Risk [Line Items]
Number of customers each accounting for greater than 10% of net accounts receivable	2	2
Allowance for Doubtful Accounts [Abstract]
Allowance for doubtful accounts	$ 1.7	$ 2.0
Customer A and Customer B [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	22.80%	22.50%

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013
Cash flows used in operating activities:
Net loss	$ (26,094)	$ (74,403)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on extinguishment of debt	0	28,630
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements	27,143	28,857
Share-based compensation costs	23,443	18,147
Amortization of intangible assets	30,712	35,661
Provision for inventory excess and obsolescence	12,972	9,027
Provision for warranty	12,424	11,060
Other	10,164	5,068
Changes in assets and liabilities:
Accounts receivable	(27,548)	(76,526)
Inventories	(57,821)	2,975
Prepaid expenses and other	(19,054)	(33,969)
Accounts payable, accruals and other obligations	(51,631)	24,805
Deferred revenue	30,123	19,799
Net cash used in operating activities	(35,167)	(869)
Cash flows provided by (used in) investing activities:
Payments for equipment, furniture, fixtures and intellectual property	(26,485)	(21,496)
Restricted cash	1,912	1,679
Purchase of available for sale securities	(95,033)	(99,914)
Proceeds from maturities of available for sale securities	130,000	50,000
Settlement of foreign currency forward contracts, net	(4,029)	0
Net cash provided by (used in) investing activities	6,365	(69,731)
Cash flows from financing activities:
Payment of long term debt	0	(216,210)
Payment for debt and equity issuance costs	0	(3,661)
Payment of capital lease obligations	(1,520)	(1,427)
Proceeds from issuance of common stock	8,970	5,955
Net cash provided by (used in) financing activities	7,450	(215,343)
Effect of exchange rate changes on cash and cash equivalents	(52)	(3)
Net decrease in cash and cash equivalents	(21,352)	(285,943)
Cash and cash equivalents at beginning of period	346,487	642,444
Cash and cash equivalents at end of period	325,083	356,498
Supplemental disclosure of cash flow information
Cash paid during the period for interest	17,047	15,720
Cash paid during the period for income taxes, net	7,221	5,136
Non-cash investing and financing activities
Purchase of equipment in accounts payable	4,799	3,006
Fixed assets acquired under capital leases	$ 0	$ 1,286

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Share-Based Compensation Expense (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Apr. 30, 2014
Summary of stock option activity [Roll Forward]
Shares Underlying Options Outstanding, Beginning Balance (in shares)	2,102
Shares Underlying Options Outstanding, Exercised (in shares)	(108)
Shares Underlying Options Outstanding, Canceled (in shares)	(379)
Shares Underlying Options Outstanding, Ending Balance (in shares)	1,615
Weighted average exercise price [Roll Forward]
Weighted Average Exercise Price, Beginning Balance (in dollars per share)	$ 27.46
Weighted Average Exercise Price, Exercised (in dollars per share)	$ 17.82
Weighted Average Exercise Price, Canceled (in dollars per share)	$ 42.39
Weighted Average Exercise Price, Ending Balance (in dollars per share)	$ 24.60

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Earnings (Loss) Per Share Calculation (Tables)

6 Months Ended

Apr. 30, 2014

Earnings Per Share [Abstract]

Reconciliation of numerator and denominator of Basic and Diluted Earnings Per Share

The following table (in thousands except per share amounts) is a reconciliation of the numerator and denominator of the basic net income (loss) per common share (“Basic EPS”) and the diluted net income (loss) per potential common share (“Diluted EPS”). Because the numerator reflects net losses for the periods indicated, both Basic EPS and Diluted EPS are computed using the weighted average number of common shares outstanding. Were the numerator to reflect net income, Diluted EPS would also include, to the extent the effect is not anti-dilutive, the following: (i) common shares outstanding, (ii) shares issuable upon vesting of restricted stock units, (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method, and (iv) shares underlying Ciena’s outstanding convertible notes.

	Quarter Ended April 30,						Six Months Ended April 30,
Numerator	2013			2014			2013			2014
Net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)

	Quarter Ended April 30,		Six Months Ended April 30,
Denominator	2013	2014	2013	2014
Weighted average basic common shares outstanding	101,913	105,451	101,560	104,977
Weighted average dilutive potential common shares outstanding	101,913	105,451	101,560	104,977

	Quarter Ended April 30,						Six Months Ended April 30,
EPS	2013			2014			2013			2014
Basic EPS	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)
Diluted EPS	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)

Weighted average shares excluded from calculation of denominator for Basic and Diluted EPS

The following table summarizes the weighted average shares excluded from the calculation of the denominator for Basic and Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands):

	Quarter Ended April 30,		Six Months Ended April 30,
	2013	2014	2013	2014
Shares underlying stock options and restricted stock units	4,267	3,256	4,366	3,430
0.25% Convertible Senior Notes due May 1, 2013	5,288	—	5,379	—
4.0% Convertible Senior Notes due March 15, 2015	9,198	9,198	11,891	9,198
0.875% Convertible Senior Notes due June 15, 2017	13,108	13,108	13,108	13,108
3.75% Convertible Senior Notes due October 15, 2018	17,356	17,356	17,356	17,356
4.0% Convertible Senior Notes due December 15, 2020	9,198	9,198	6,505	9,198
Total shares excluded due to anti-dilutive effect	58,415	52,116	58,605	52,290

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Segment and Entity Wide Disclosures (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013	Oct. 31, 2013
Ciena's geographic distribution of revenue
Revenue	$ 560,061	$ 507,712	$ 1,093,764	$ 960,805
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, furniture and fixtures, net	119,876		119,876		119,729
United States [Member]
Ciena's geographic distribution of revenue
Revenue	323,927	287,572	641,377	551,807
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, furniture and fixtures, net	64,415		64,415		64,132
Canada [Member]
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, furniture and fixtures, net	42,978		42,978		43,772
International [Member]
Ciena's geographic distribution of revenue
Revenue	236,134	220,140	452,387	408,998
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, furniture and fixtures, net	$ 12,483		$ 12,483		$ 11,825

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Share-Based Compensation Expense

6 Months Ended

Apr. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION EXPENSE

SHARE-BASED COMPENSATION EXPENSE

Ciena grants equity awards under its 2008 Omnibus Incentive Plan (the "2008 Plan") and the Amended and Restated Employee Stock Purchase Plan (the “ESPP”). These plans were approved by stockholders and are described in Ciena’s Annual Report on Form 10-K for the fiscal year ended October 31, 2013.

2008 Omnibus Incentive Plan

The 2008 Plan authorizes the issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock, stock appreciation rights (SARs) and other equity and/or cash performance incentive awards to employees, directors, and consultants of Ciena. Subject to certain restrictions, the Compensation Committee of the Board of Directors has broad discretion to establish the terms and conditions for awards under the 2008 Plan, including the number of shares, vesting conditions, and the required service or performance criteria. Options and SARs have a maximum term of ten years, and their exercise price may not be less than 100% of fair market value on the date of grant. Repricing of stock options and SARs is prohibited without stockholder approval. Certain change in control transactions may cause awards granted under the 2008 Plan to vest, unless the awards are continued or substituted for in connection with the transaction. Pursuant to Board and stockholder approval, effective April 10, 2014, Ciena amended its 2008 Plan to increase the number of shares available for issuance by 6.6 million shares. The total number of shares authorized for issuance under the 2008 Plan is 25.1 million shares. As of April 30, 2014, approximately 9.2 million shares remained available for issuance under the 2008 Plan.

Stock Options

Outstanding stock option awards to employees are generally subject to service-based vesting restrictions and vest incrementally over a four-year period. As of April 30, 2014, all outstanding options have completed their service-based vesting conditions and are fully vested. The following table is a summary of Ciena’s stock option activity for the period indicated (shares in thousands):

	Shares Underlying Options Outstanding		Weighted Average Exercise Price
Balance at October 31, 2013	2,102		$	27.46
Exercised	(108	)	17.82
Canceled	(379	)	42.39
Balance at April 30, 2014	1,615		$	24.60

The total intrinsic value of options exercised during the first six months of fiscal 2013 and fiscal 2014 was $0.3 million and $0.7 million, respectively. Ciena did not grant any stock options during the first six months of fiscal 2013 or fiscal 2014.

The following table summarizes information with respect to stock options outstanding at April 30, 2014, based on Ciena’s closing stock price on the last trading day of Ciena’s second fiscal quarter of 2014 (shares and intrinsic value in thousands):

					Options Outstanding and Vested at
					April 30, 2014
					Number	Weighted Average Remaining	Weighted
Range of					of	Contractual	Average		Aggregate
Exercise					Underlying	Life	Exercise		Intrinsic
Price					Shares	(Years)	Price		Value
$	0.94	—	$	16.31	174	3.66	$	8.25	$	1,929
$	16.52	—	$	17.29	264	1.17	16.64		710
$	17.43	—	$	24.50	353	1.02	20.45		242
$	24.69	—	$	28.28	335	2.50	27.01		—
$	28.61	—	$	31.43	103	3.30	29.80		—
$	31.71	—	$	32.55	21	3.22	31.92		—
$	33.00	—	$	37.10	249	3.55	35.23		—
$	37.45	—	$	46.44	116	3.28	44.30		—
$	0.94	—	$	46.44	1,615	2.36	$	24.60	$	2,881

Assumptions for Option-Based Awards

Ciena recognizes the fair value of service-based options as share-based compensation expense on a straight-line basis over the requisite service period.

Restricted Stock Units

A restricted stock unit is a stock award that entitles the holder to receive shares of Ciena common stock as the unit vests. Ciena’s outstanding restricted stock unit awards are subject to service and/or performance-based vesting conditions. Awards subject to service-based conditions typically vest in increments over a three or four-year period. Awards with performance-based vesting conditions require the achievement of certain operational, financial or other performance criteria or targets as a condition of vesting, or the acceleration of vesting, of such awards. Ciena recognizes the estimated fair value of performance-based awards, net of estimated forfeitures, as share-based compensation expense over the performance period, using graded vesting, which considers each performance period or tranche separately, based upon Ciena’s determination of whether it is probable that the performance targets will be achieved. At each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets.

The following table is a summary of Ciena’s restricted stock unit activity for the period indicated, with the aggregate fair value of the balance outstanding at the end of each period, based on Ciena’s closing stock price on the last trading day of the relevant period (shares and aggregate fair value in thousands):

	Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value Per Share		Aggregate Fair Value
Balance at October 31, 2013	4,419		$	15.33	$	102,745
Granted	1,745
Vested	(1,252	)
Canceled or forfeited	(99	)
Balance at April 30, 2014	4,813		$	17.67	$	93,052

The total fair value of restricted stock units that vested and were converted into common stock during the first six months of fiscal 2013 and fiscal 2014 was $15.9 million and $29.1 million, respectively. The weighted average fair value of each restricted stock unit granted by Ciena during the first six months of fiscal 2013 and fiscal 2014 was $15.75 and $21.95 respectively.

Assumptions for Restricted Stock Unit Awards

The fair value of each restricted stock unit award is based on the closing price on the date of grant. Share-based expense for service-based restricted stock unit awards is recognized, net of estimated forfeitures, ratably over the vesting period on a straight-line basis.

Share-based expense for performance-based restricted stock unit awards, net of estimated forfeitures, is recognized ratably over the performance period based upon Ciena's determination of whether it is probable that the performance targets will be achieved. At each reporting period, Ciena reassesses the probability of achieving the performance targets and the performance period required to meet those targets. The estimation of whether the performance targets will be achieved involves judgment, and the estimate of expense is revised periodically based on the probability of achieving the performance targets. Revisions are reflected in the period in which the estimate is changed. If any performance goals are not met, no compensation cost is ultimately recognized against that goal, and, to the extent previously recognized, compensation cost is reversed.

Because share-based compensation expense is recognized only for those awards that are ultimately expected to vest, the amount of share-based compensation expense recognized reflects a reduction for estimated forfeitures. Ciena estimates forfeitures at the time of grant and revises those estimates in subsequent periods based upon new or changed information.

Amended and Restated Employee Stock Purchase Plan (ESPP)

Under the ESPP, eligible employees may enroll in a twelve-month offer period that begins in December and June of each year. Each offer period includes twosix-month purchase periods. Employees may purchase a limited number of shares of Ciena common stock at 85% of the fair market value on either the day immediately preceding the offer date or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of share-based compensation expense. Pursuant to the ESPP's “evergreen” provision, on December 31 of each year, the number of shares available under the ESPP increases by up to 0.6 million shares, provided that the total number of shares available at that time shall not exceed 8.2 million. Unless earlier terminated, the ESPP will terminate on January 24, 2023.

During the first six months of fiscal 2014, Ciena issued 0.5 million shares under the ESPP. At April 30, 2014, 7.3 million shares remained available for issuance under the ESPP.

Share-Based Compensation Expense for Periods Reported

The following table summarizes share-based compensation expense for the periods indicated (in thousands):

	Quarter Ended April 30,					Six Months Ended April 30,
	2013			2014		2013			2014
Product costs	$	686		$	741	$	1,247		$	1,247
Service costs	435			568		862			1,148
Share-based compensation expense included in cost of sales	1,121			1,309		2,109			2,395
Research and development	2,204			2,782		4,237			5,354
Sales and marketing	3,382			4,246		6,125			8,309
General and administrative	3,144			3,661		5,700			7,167
Share-based compensation expense included in operating expense	8,730			10,689		16,062			20,830
Share-based compensation expense capitalized in inventory, net	(24		)	53		(24		)	218
Total share-based compensation	$	9,827		$	12,051	$	18,147		$	23,443

As of April 30, 2014, total unrecognized share-based compensation expense related to unvested restricted stock units,was $72.4 million, and this expense is expected to be recognized over a weighted-average period of 1.5 years.

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Share-Based Compensation Expense (Tables)

6 Months Ended

Apr. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of stock option activity

The following table is a summary of Ciena’s stock option activity for the period indicated (shares in thousands):

	Shares Underlying Options Outstanding		Weighted Average Exercise Price
Balance at October 31, 2013	2,102		$	27.46
Exercised	(108	)	17.82
Canceled	(379	)	42.39
Balance at April 30, 2014	1,615		$	24.60

Summarizes information with respect to stock options outstanding

The following table summarizes information with respect to stock options outstanding at April 30, 2014, based on Ciena’s closing stock price on the last trading day of Ciena’s second fiscal quarter of 2014 (shares and intrinsic value in thousands):

					Options Outstanding and Vested at
					April 30, 2014
					Number	Weighted Average Remaining	Weighted
Range of					of	Contractual	Average		Aggregate
Exercise					Underlying	Life	Exercise		Intrinsic
Price					Shares	(Years)	Price		Value
$	0.94	—	$	16.31	174	3.66	$	8.25	$	1,929
$	16.52	—	$	17.29	264	1.17	16.64		710
$	17.43	—	$	24.50	353	1.02	20.45		242
$	24.69	—	$	28.28	335	2.50	27.01		—
$	28.61	—	$	31.43	103	3.30	29.80		—
$	31.71	—	$	32.55	21	3.22	31.92		—
$	33.00	—	$	37.10	249	3.55	35.23		—
$	37.45	—	$	46.44	116	3.28	44.30		—
$	0.94	—	$	46.44	1,615	2.36	$	24.60	$	2,881

Summary of restricted stock unit activity

The following table is a summary of Ciena’s restricted stock unit activity for the period indicated, with the aggregate fair value of the balance outstanding at the end of each period, based on Ciena’s closing stock price on the last trading day of the relevant period (shares and aggregate fair value in thousands):

	Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value Per Share		Aggregate Fair Value
Balance at October 31, 2013	4,419		$	15.33	$	102,745
Granted	1,745
Vested	(1,252	)
Canceled or forfeited	(99	)
Balance at April 30, 2014	4,813		$	17.67	$	93,052

Share-based compensation expense

The following table summarizes share-based compensation expense for the periods indicated (in thousands):

	Quarter Ended April 30,					Six Months Ended April 30,
	2013			2014		2013			2014
Product costs	$	686		$	741	$	1,247		$	1,247
Service costs	435			568		862			1,148
Share-based compensation expense included in cost of sales	1,121			1,309		2,109			2,395
Research and development	2,204			2,782		4,237			5,354
Sales and marketing	3,382			4,246		6,125			8,309
General and administrative	3,144			3,661		5,700			7,167
Share-based compensation expense included in operating expense	8,730			10,689		16,062			20,830
Share-based compensation expense capitalized in inventory, net	(24		)	53		(24		)	218
Total share-based compensation	$	9,827		$	12,051	$	18,147		$	23,443

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Commitments and Contingencies

6 Months Ended

Apr. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Ontario Grant

Ciena was awarded a conditional grant from the Province of Ontario in June 2011. Under this strategic jobs investment fund grant, Ciena can receive up to an aggregate of C$25.0 million in funding for eligible costs relating to certain next-generation, coherent optical transport development initiatives over the period from November 1, 2010 to October 31, 2015. Ciena anticipates receiving disbursements, approximating C$5.0 million per fiscal year, over the period above. Amounts received under the grant are subject to recoupment in the event that Ciena fails to achieve certain minimum investment, employment and project milestones. As of April 30, 2014, Ciena has recorded a C$20.0 million benefit to date as a reduction in research and development expenses, of which C$3.6 million was recorded in the first six months of fiscal 2014. As of April 30, 2014, amounts receivable from this grant were C$3.6 million.

Foreign Tax Contingencies

As of October 31, 2013 and April 30, 2014, Ciena had accrued liabilities of $0.4 million related to a preliminary assessment notice from the India tax authorities asserting deficiencies in payments for the tax year 2009 related to income taxes. This contingency has been reported as a component of other long-term liabilities. During February 2014, Ciena received a final audit assessment notice from the India tax authorities with respect to this matter. Ciena has filed an appeal citing deficiencies in this assessment. Although Ciena estimates that it could be exposed to possible losses of up to $2.9 million, it has not accrued a liability of such amount as of April 30, 2014. Ciena has not accrued the additional income tax liability because it does not believe that such a loss is more likely than not. Ciena continues to evaluate the likelihood of a probable and reasonably possible loss, if any, related to this assessment. As a result, future increases or decreases to accrued liabilities may be necessary and will be recorded in the period when such amounts are estimable and more likely than not to occur.

Ciena is subject to various tax liabilities arising in the ordinary course of business. Ciena does not expect that the ultimate settlement of these liabilities will have a material effect on its results of operations, financial position or cash flows.

Litigation

On May 29, 2008, Graywire, LLC filed a complaint in the United States District Court for the Northern District of Georgia against Ciena and four other defendants, alleging, among other things, that certain of the parties' products infringe U.S. Patent 6,542,673 (the “'673 Patent”), relating to an identifier system and components for optical assemblies. The complaint seeks injunctive relief and damages. In July 2009, upon request of Ciena and certain other defendants, the U.S. Patent and Trademark Office (“PTO”) granted the defendants' inter partes application for reexamination with respect to certain claims of the '673 Patent, and the district court granted the defendants' motion to stay the case pending reexamination of all of the patents-in-suit. In December 2010, the PTO confirmed the validity of some claims and rejected the validity of other claims of the '673 Patent, to which Ciena and other defendants filed an appeal. On March 16, 2012, the PTO on appeal rejected multiple claims of the '673 Patent, including the two claims on which Ciena is alleged to infringe. Subsequently, the plaintiff requested a reopening of the prosecution of the '673 Patent, which request was denied by the PTO on April 29, 2013. Thereafter, on May 28, 2013, the plaintiff filed an amendment with the PTO in which it canceled the claims of the '673 Patent on which Ciena is alleged to infringe. The case currently remains stayed, and there can be no assurance as to whether or when the stay will be lifted.

 In addition to the matters described above, Ciena is subject to various legal proceedings and claims arising in the ordinary course of business, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. Ciena does not expect that the ultimate costs to resolve these matters will have a material effect on its results of operations, financial position or cash flows.

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Commitments and Contingencies (Details 1) (Ministry of Finance, India [Member], USD $) In Millions, unless otherwise specified			6 Months Ended
	Apr. 30, 2014	Oct. 31, 2013	Apr. 30, 2014 Maximum [Member]
Income Tax Examination [Line Items]
Accrued liabilities related to contingencies	$ 0.4	$ 0.4
Estimate of possible loss			$ 2.9

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Interim Financial Statements

6 Months Ended

Apr. 30, 2014

Quarterly Financial Data [Abstract]

INTERIM FINANCIAL STATEMENTS

INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein for Ciena Corporation (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, the financial statements included in this report reflect all normal recurring adjustments that Ciena considers necessary for the fair statement of the results of operations for the interim periods covered and of the financial position of Ciena at the date of the interim balance sheets. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of October 31, 2013 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. However, Ciena believes that the disclosures are adequate to understand the information presented herein. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with Ciena’s audited consolidated financial statements and the notes thereto included in Ciena’s annual report on Form 10-K for the fiscal year ended October 31, 2013.

Ciena has a 52 or 53-week fiscal year, which ends on the Saturday nearest to the last day of October of each year. Fiscal 2014 and 2013 are 52-week fiscal years. For purposes of financial statement presentation, each fiscal year is described as having ended on October 31, and the fiscal quarters are described as having ended on January 31, April 30 and July 31 of each fiscal year.

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Condensed Consolidated Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Statement of Comprehensive Income [Abstract]
Net loss	$ (10,158)	$ (27,079)	$ (26,094)	$ (74,403)
Change in unrealized gain (loss) on available-for-sale securities, net of tax	10	13	31	(31)
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax	1,625	(194)	(349)	(117)
Change in cumulative translation adjustment	935	(2,004)	(4,165)	(1,044)
Other comprehensive income (loss)	2,570	(2,185)	(4,483)	(1,192)
Total comprehensive loss	$ (7,588)	$ (29,264)	$ (30,577)	$ (75,595)

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Other Balance Sheet Details

6 Months Ended

Apr. 30, 2014

Balance Sheet Related Disclosures [Abstract]

OTHER BALANCE SHEET DETAILS

OTHER BALANCE SHEET DETAILS

As of the dates indicated, other long-term assets are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Maintenance spares inventory, net	$	61,305	$	56,090
Deferred debt issuance costs, net	15,677		13,302
Embedded redemption feature	2,740		—
Restricted cash	2,053		141
Other	4,605		4,560
	$	86,380	$	74,093

Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate method, through the maturity of the related debt. Amortization of debt issuance costs related to our convertible notes payable and the Credit Facility (described in Note 14 below), which is included in interest expense, was $3.0 million and $2.4 million during the first six months of fiscal 2013 and fiscal 2014, respectively.

As of the dates indicated, accrued liabilities are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Warranty	$	56,303	$	56,167
Compensation, payroll related tax and benefits	98,770		64,113
Vacation	32,118		34,503
Current restructuring liabilities	674		677
Interest payable	6,186		6,179
Other	77,605		92,797
	$	271,656	$	254,436

The following table summarizes the activity in Ciena’s accrued warranty for the fiscal periods indicated (in thousands):

						Balance at
Six months ended	Beginning					end of
April 30,	Balance		Provisions	Settlements		period
2013	$	55,132	11,060	(11,463	)	$	54,729
2014	$	56,303	12,424	(12,560	)	$	56,167

As of the dates indicated, deferred revenue is comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Products	$	36,671		$	64,326
Services	75,499			77,967
	112,170			142,293
Less current portion	(88,550		)	(118,473		)
Long-term deferred revenue	$	23,620		$	23,820

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Document and Entity Information	6 Months Ended
	Apr. 30, 2014	Jun. 06, 2014
Document Information [Line Items]
Entity Registrant Name	CIENA CORP
Entity Central Index Key	0000936395
Current Fiscal Year End Date	--10-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Apr. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		105,593,414
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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Foreign Currency Forward Contracts

6 Months Ended

Apr. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FOREIGN CURRENCY FORWARD CONTRACTS

FOREIGN CURRENCY FORWARD CONTRACTS

As of April 30, 2014, Ciena had forward contracts to reduce the variability in its Canadian Dollar and Indian Rupee denominated expense, which expense principally relates to research and development activities. These derivative contracts have been designated as cash flow hedges. During the first six months of fiscal 2014, in order to hedge certain balance sheet exposures, Ciena entered into forward contracts to sell Brazilian Real and buy an equivalent U.S. Dollar amount and forward contracts to sell U.S. Dollars and buy an equivalent amount of Canadian Dollars. These derivative contracts have not been designated as hedges. Ciena's foreign currency forward contracts are immaterial for separate financial statement presentation.

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Oct. 31, 2013
Current assets:
Cash and cash equivalents	$ 325,083	$ 346,487
Short-term investments	90,049	124,979
Accounts receivable, net	514,973	488,578
Inventories	293,952	249,103
Prepaid expenses and other	207,279	186,655
Total current assets	1,431,336	1,395,802
Long-term investments	15,042	15,031
Equipment, furniture and fixtures, net	119,876	119,729
Other intangible assets, net	155,117	185,828
Other long-term assets	74,093	86,380
Total assets	1,795,464	1,802,770
Current liabilities:
Accounts payable	229,498	254,849
Accrued liabilities	254,436	271,656
Deferred revenue	118,473	88,550
Convertible notes payable	187,647	0
Total current liabilities	790,054	615,055
Long-term deferred revenue	23,820	23,620
Other long-term obligations	35,789	34,753
Long-term convertible notes payable	1,026,641	1,212,019
Total liabilities	1,876,304	1,885,447
Commitments and contingencies
Stockholders’ equity (deficit):
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding	0	0
Common stock – par value $0.01; 290,000,000 shares authorized; 103,705,709 and 105,584,958 shares issued and outstanding	1,056	1,037
Additional paid-in capital	5,926,276	5,893,880
Accumulated other comprehensive loss	(12,258)	(7,774)
Accumulated deficit	(5,995,914)	(5,969,820)
Total stockholders’ equity (deficit)	(80,840)	(82,677)
Total liabilities and stockholders’ equity (deficit)	$ 1,795,464	$ 1,802,770

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Accounts Receivable

6 Months Ended

Apr. 30, 2014

Receivables [Abstract]

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

As of October 31, 2013, two customers each accounted for greater than 10% of net accounts receivable and in the aggregate accounted for 22.5% of net accounts receivable. As of April 30, 2014, two customers each accounted for greater than 10% of net accounts receivable, and in the aggregate accounted for 22.8% of net accounts receivable. Allowance for doubtful accounts was $2.0 million and $1.7 million as of October 31, 2013 and April 30, 2014, respectively. Ciena has not historically experienced a significant amount of bad debt expense.

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Fair Value Measurements

6 Months Ended

Apr. 30, 2014

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

As of the date indicated, the following table summarizes the fair value of assets and liabilities that are recorded at fair value on a recurring basis (in thousands):

	April 30, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	226,925	$	—	$	—	$	226,925
U.S. government obligations	—		75,100		—		75,100
Commercial paper	—		49,989		—		49,989
Foreign currency forward contracts	—		296		—		296
Embedded redemption feature	—		—		190		190
Total assets measured at fair value	$	226,925	$	125,385	$	190	$	352,500
Liabilities:
Foreign currency forward contracts	$	—	$	3,548	$	—	$	3,548
Total liabilities measured at fair value	$	—	$	3,548	$	—	$	3,548

As of the date indicated, the assets and liabilities above were presented on Ciena’s Condensed Consolidated Balance Sheet as follows (in thousands):

	April 30, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	226,782	$	19,998	$	—	$	246,780
Short-term investments	—		90,049		—		90,049
Prepaid expenses and other	52		296		190		538
Long-term investments	—		15,042		—		15,042
Other long-term assets	91		—		—		91
Total assets measured at fair value	$	226,925	$	125,385	$	190	$	352,500
Liabilities:
Accrued liabilities	$	—	$	3,548	$	—	$	3,548
Total liabilities measured at fair value	$	—	$	3,548	$	—	$	3,548

Ciena’s Level 3 assets included in other long-term assets reflect an embedded redemption feature contained within the 2015 Notes. The embedded redemption feature is bifurcated from the 2015 Notes using the “with-and-without” approach. As such, the total value of the embedded redemption feature is calculated as the difference between the value of the 2015 Notes (the “Hybrid Instrument”) and the value of an identical instrument without the embedded redemption feature (the “Host Instrument”). Both the Host Instrument and the Hybrid Instrument are valued using a modified binomial model. The modified binomial model utilizes a risk free interest rate, an implied volatility of Ciena’s stock, the recovery rates of bonds and the implied default intensity of the 2015 Notes.

As of the dates indicated, the following table sets forth, in thousands, the reconciliation of changes in fair value measurements of Level 3 assets:

	Level 3
Balance at October 31, 2013	$	2,740
Issuances	—
Settlements	—
Changes in unrealized gain (loss)	(2,550		)
Transfers into Level 3	—
Transfers out of Level 3	—
Balance at April 30, 2014	$	190

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Segment and Entity Wide Disclosures

6 Months Ended

Apr. 30, 2014

Segment Reporting [Abstract]

SEGMENT AND ENTITY WIDE DISCLOSURES

SEGMENTS AND ENTITY WIDE DISCLOSURES

Segment Reporting

Ciena’s internal organizational structure and the management of its business are grouped into the following operating segments:

• Converged Packet Optical — includes networking solutions optimized for the convergence of coherent optical transport, OTN switching and packet switching. These platforms enable automated packet-optical infrastructures that create and efficiently allocate high-capacity bandwidth for the delivery of a wide variety of enterprise and consumer-oriented network services. Products in this segment include the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, which feature Ciena's WaveLogic coherent optical processors. Products also include Ciena's family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. These products include multiservice, multi-protocol switching systems that consolidate the functionality of an add/drop multiplexer, digital cross-connect and packet switch into a single, high-capacity intelligent switching system. These products address both the core and metro segments of communications networks and support key managed services, Ethernet/TDM Private Line, Triple Play and IP services. This segment also includes sales of operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Packet Networking — principally includes Ciena's 3000 family of service delivery switches and service aggregation switches, the 5000 series of service aggregation switches, and its Ethernet packet configuration for the 5410 Service Aggregation Switch. These products support the access and aggregation tiers of communications networks and have principally been deployed to support wireless backhaul infrastructures and business data services. Employing sophisticated, carrier-grade Ethernet switching technology, these products deliver quality of service capabilities, virtual local area networking and switching functions, and carrier-grade operations, administration, and maintenance features. This segment includes stand-alone broadband products that transition voice networks to support Internet-based (IP) telephony, video services and DSL. This segment also includes sales of operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Optical Transport — includes optical transport solutions that add capacity to core, regional and metro networks and enable cost-effective and efficient transport of voice, video and data traffic at high transmission speeds. Ciena's principal products in this segment include the 4200 Advanced Services Platform, Corestream® Agility Optical Transport System, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL), and 6100 Multiservice Optical Platform. This segment includes sales from SONET/SDH, transport and data networking products, as well as certain enterprise-oriented transport solutions that support storage and LAN extension, interconnection of data centers, and virtual private networks. This segment also includes operating system software and enhanced software features embedded in each of these products. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations.

• Software and Services — includes Ciena's network software suite, including the OneControl Unified Management System, an integrated network and service management software designed to automate and simplify network management, operation and service delivery. These software solutions can track individual services across multiple product suites, facilitating planned network maintenance, outage detection and identification of customers or services affected by network performance. This segment includes the ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and network level applications. This segment includes a broad range of consulting, network design and support services from Ciena's Network Transformation Solutions offering. This segment also includes installation and deployment, maintenance support and training activities. Except for revenue from the software portion of this segment, which is included in product revenue, revenue from this segment is included in services revenue on the Condensed Consolidated Statement of Operations.

Asset information for reportable segments is not disclosed because it is not reviewed by the chief operating decision maker for purposes of evaluating performance and allocating resources.

Segment Revenue

The table below (in thousands) sets forth Ciena’s segment revenue for the respective periods:

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
Revenue:
Converged Packet Optical	$	294,325	$	356,840	$	534,285	$	690,241
Packet Networking	54,190		66,526		100,027		118,235
Optical Transport	57,371		29,616		114,968		69,713
Software and Services	101,826		107,079		211,525		215,575
Consolidated revenue	$	507,712	$	560,061	$	960,805	$	1,093,764

Segment Profit

Segment profit is determined based on internal performance measures used by the chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; amortization of intangible assets; restructuring costs; interest and other income (loss), net; interest expense; loss on extinguishment of debt and provisions for income taxes.

The table below (in thousands) sets forth Ciena’s segment profit and the reconciliation to consolidated net loss during the respective periods indicated:

	Quarter Ended April 30,						Six Months Ended April 30,
	2013			2014			2013			2014
Segment profit:
Converged Packet Optical	$	57,528		$	96,581		$	104,646		$	175,279
Packet Networking	2,556			8,196			7,639			8,581
Optical Transport	21,413			4,709			42,000			20,359
Software and Services	27,229			24,713			61,111			54,334
Total segment profit	108,726			134,199			215,396			258,553
Less: non-performance operating expenses
Selling and marketing	74,475			83,662			141,063			162,010
General and administrative	30,883			31,882			59,091			61,979
Amortization of intangible assets	12,439			11,493			24,892			23,932
Restructuring costs	1,509			—			6,539			115
Add: other non-performance financial items
Interest expense and other income (loss), net	(14,108		)	(12,925		)	(24,977		)	(29,951		)
Loss on extinguishment of debt	—			—			(28,630		)	—
Less: Provision for income taxes	2,391			4,395			4,607			6,660
Consolidated net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)

Entity Wide Reporting

The following table reflects Ciena’s geographic distribution of revenue based on the location of the purchaser, with any country accounting for a significant percentage of total revenue in the period specifically identified. Revenue attributable to geographic regions outside of the United States is reflected as International revenue. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
United States	$	287,572	$	323,927	$	551,807	$	641,377
International	220,140		236,134		408,998		452,387
Total	$	507,712	$	560,061	$	960,805	$	1,093,764

The following table reflects Ciena's geographic distribution of equipment, furniture and fixtures, net, with any country accounting for a significant percentage of total equipment, furniture and fixtures, net, specifically identified. Equipment, furniture and fixtures, net, attributable to geographic regions outside of the United States and Canada are reflected as “Other International.” For the periods below, Ciena's geographic distribution of equipment, furniture and fixtures was as follows (in thousands):

	October 31, 2013		April 30, 2014
United States	$	64,132	$	64,415
Canada	43,772		42,978
Other International	11,825		12,483
Total	$	119,729	$	119,876

For the periods below, customers accounting for at least 10% of Ciena’s revenue were as follows (in thousands):

	Quarter Ended April 30,				Six Months Ended April 30,
	2013		2014		2013		2014
Company A	$	101,531	$	120,582	$	173,210	$	221,044
Company B	57,293		n/a		105,356		n/a
Total	$	158,824	$	120,582	$	278,566	$	221,044

________________________________

n/a Denotes revenue representing less than 10% of total revenue for the period

The customers identified above purchased products and services from each of Ciena's operating segments.

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Convertible Notes Payable

6 Months Ended

Apr. 30, 2014

Debt Disclosure [Abstract]

CONVERTIBLE NOTES PAYABLE

CONVERTIBLE NOTES PAYABLE

The principal balance, unamortized discount and net carrying amount of the liability and equity components of our 4.0% convertible senior notes due December 15, 2020 Notes ("2020 Notes") were as follows as of April 30, 2014:

	Liability Component						Equity Component
	Principal Balance		Unamortized Discount		Net Carrying Amount		Net Carrying Amount
4.0% Convertible Senior Notes due December 15, 2020	$	192,216	$	15,575	$	176,641	$	43,131

The following table sets forth, in thousands, the carrying value and the estimated fair value of Ciena’s outstanding convertible notes:

	April 30, 2014
	Carrying Value		Fair Value(2)
4.0% Convertible Senior Notes, due March 15, 2015 (1)	187,647		214,805
0.875% Convertible Senior Notes due June 15, 2017	500,000		494,375
3.75% Convertible Senior Notes due October 15, 2018	350,000		448,875
4.0% Convertible Senior Notes due December 15, 2020 (3)	176,641		246,797
	$	1,214,288	$	1,404,852

(1) Includes unamortized bond premium related to embedded redemption feature.

(2) The convertible notes were categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its outstanding convertible notes using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

(3) Includes unamortized discount and accretion of principal.

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Equipment, Furniture and Fixtures

6 Months Ended

Apr. 30, 2014

Property, Plant and Equipment [Abstract]

EQUIPMENT, FURNITURE AND FIXTURES

EQUIPMENT, FURNITURE AND FIXTURES

As of the dates indicated, equipment, furniture and fixtures are comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Equipment, furniture and fixtures	$	364,574		$	379,569
Leasehold improvements	46,247			46,442
	410,821			426,011
Accumulated depreciation and amortization	(291,092		)	(306,135		)
	$	119,729		$	119,876

The total of depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements, was $25.4 million and $22.9 million for the first six months of fiscal 2013 and 2014, respectively.

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Share-Based Compensation Expense (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Oct. 31, 2013
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 0.94
Range of Exercise Price, Upper (in dollars per share)	$ 46.44
Number of Underlying Shares, Options Outstanding	1,615
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	2 years 4 months 10 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 24.60	$ 27.46
Aggregate Intrinsic Value, Options Outstanding	$ 2,881
Range of Exercise Price 0.94 to 16.31 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 0.94
Range of Exercise Price, Upper (in dollars per share)	$ 16.31
Number of Underlying Shares, Options Outstanding	174
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	3 years 7 months 28 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 8.25
Aggregate Intrinsic Value, Options Outstanding	1,929
Range of Exercise Price 16.52 to 17.29 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 16.52
Range of Exercise Price, Upper (in dollars per share)	$ 17.29
Number of Underlying Shares, Options Outstanding	264
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	1 year 2 months 1 day
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 16.64
Aggregate Intrinsic Value, Options Outstanding	710
Range of Exercise Price 17.43 to 24.50 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 17.43
Range of Exercise Price, Upper (in dollars per share)	$ 24.5
Number of Underlying Shares, Options Outstanding	353
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	1 year 0 months 7 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 20.45
Aggregate Intrinsic Value, Options Outstanding	242
Range of Exercise Price 24.69 to 28.28 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 24.69
Range of Exercise Price, Upper (in dollars per share)	$ 28.28
Number of Underlying Shares, Options Outstanding	335
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	2 years 6 months 0 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 27.01
Aggregate Intrinsic Value, Options Outstanding	0
Range of Exercise Price 28.61 to 31.43 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 28.61
Range of Exercise Price, Upper (in dollars per share)	$ 31.43
Number of Underlying Shares, Options Outstanding	103
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	3 years 3 months 18 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 29.80
Aggregate Intrinsic Value, Options Outstanding	0
Range of Exercise Price 31.71 to 32.55 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 31.71
Range of Exercise Price, Upper (in dollars per share)	$ 32.55
Number of Underlying Shares, Options Outstanding	21
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	3 years 2 months 19 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 31.92
Aggregate Intrinsic Value, Options Outstanding	0
Range of Exercise Price 33.00 to 37.10 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 33
Range of Exercise Price, Upper (in dollars per share)	$ 37.1
Number of Underlying Shares, Options Outstanding	249
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	3 years 6 months 18 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 35.23
Aggregate Intrinsic Value, Options Outstanding	0
Range of Exercise Price 37.45 to 46.44 [Member]
Summarizes information with respect to stock options outstanding
Range of Exercise Price, Lower (in dollars per share)	$ 37.45
Range of Exercise Price, Upper (in dollars per share)	$ 46.44
Number of Underlying Shares, Options Outstanding	116
Weighted Average, Outstanding Options Remaining Contractual Life (Years)	3 years 3 months 11 days
Weighted Average Exercise Price, Options Outstanding (in dollars per share)	$ 44.30
Aggregate Intrinsic Value, Options Outstanding	$ 0

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Inventories

6 Months Ended

Apr. 30, 2014

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

As of the dates indicated, inventories are comprised of the following (in thousands):

	October 31, 2013			April 30, 2014
Raw materials	$	53,274		$	56,689
Work-in-process	7,773			7,919
Finished goods	153,855			181,020
Deferred cost of goods sold	75,764			95,783
	290,666			341,411
Provision for excess and obsolescence	(41,563		)	(47,459		)
	$	249,103		$	293,952

Ciena writes down its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand and market conditions. During the first six months of fiscal 2014, Ciena recorded a provision for excess and obsolescence of $13.0 million, primarily related to engineering design changes and the discontinuance of certain parts and components used in the manufacture of our Optical Transport products, including our Corestream® Agility Optical Transport platform, and Converged Packet Optical products. Deductions from the provision for excess and obsolete inventory relate to disposal activities.

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Prepaid Expenses and Other

6 Months Ended

Apr. 30, 2014

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID EXPENSES AND OTHER

PREPAID EXPENSES AND OTHER

As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands):

	October 31, 2013		April 30, 2014
Prepaid VAT and other taxes	$	101,072	$	106,790
Deferred deployment expense	23,190		25,123
Product demonstration equipment, net	33,382		43,184
Prepaid expenses	16,963		15,244
Embedded redemption feature	—		190
Other non-trade receivables	11,996		16,696
Restricted cash	52		52
	$	186,655	$	207,279

Depreciation of product demonstration equipment was $3.5 million and $4.2 million for the first six months of fiscal 2013 and 2014, respectively.

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Other Intangible Assets

6 Months Ended

Apr. 30, 2014

Intangible Assets, Net (Excluding Goodwill) [Abstract]

OTHER INTANGIBLE ASSETS

OTHER INTANGIBLE ASSETS

As of the dates indicated, other intangible assets are comprised of the following (in thousands):

	October 31, 2013							April 30, 2014
	Gross Intangible		Accumulated Amortization			Net Intangible		Gross Intangible		Accumulated Amortization			Net Intangible
Developed technology	$	417,833	$	(321,645	)	$	96,188	$	417,833	$	(338,428	)	$	79,405
Patents and licenses	46,538		(45,744		)	794		46,538		(45,826		)	712
Customer relationships, covenants not to compete, outstanding purchase orders and contracts	323,573		(234,727		)	88,846		323,573		(248,573		)	75,000
Total other intangible assets	$	787,944	$	(602,116	)	$	185,828	$	787,944	$	(632,827	)	$	155,117

The amortization of finite-lived other intangible assets was $35.7 million and $30.7 million for the first six months of fiscal 2013 and 2014, respectively. Expected future amortization of finite-lived other intangible assets for the fiscal years indicated is as follows (in thousands):

Period ended October 31,
2014 (remaining six months)	$	26,439
2015	52,879
2016	52,879
2017	22,783
2018	137
	$	155,117

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Segment and Entity Wide Disclosures (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Revenue:
Revenue	$ 560,061	$ 507,712	$ 1,093,764	$ 960,805
Segment profit (loss) and the reconciliation to consolidated net income (loss)
Segment profit	134,199	108,726	258,553	215,396
Less: non-performance operating expenses
Selling and marketing	83,662	74,475	162,010	141,063
General and administrative	31,882	30,883	61,979	59,091
Amortization of intangible assets	11,493	12,439	23,932	24,892
Restructuring costs	0	1,509	115	6,539
Add: other non-performance financial items
Interest expense and other income (loss), net	(12,925)	(14,108)	(29,951)	(24,977)
Loss on extinguishment of debt	0	0	0	(28,630)
Less: Provision for income taxes	4,395	2,391	6,660	4,607
Net loss	(10,158)	(27,079)	(26,094)	(74,403)
Converged Packet Optical [Member]
Revenue:
Revenue	356,840	294,325	690,241	534,285
Segment profit (loss) and the reconciliation to consolidated net income (loss)
Segment profit	96,581	57,528	175,279	104,646
Packet Networking [Member]
Revenue:
Revenue	66,526	54,190	118,235	100,027
Segment profit (loss) and the reconciliation to consolidated net income (loss)
Segment profit	8,196	2,556	8,581	7,639
Optical Transport [Member]
Revenue:
Revenue	29,616	57,371	69,713	114,968
Segment profit (loss) and the reconciliation to consolidated net income (loss)
Segment profit	4,709	21,413	20,359	42,000
Software and Services [Member]
Revenue:
Revenue	107,079	101,826	215,575	211,525
Segment profit (loss) and the reconciliation to consolidated net income (loss)
Segment profit	$ 24,713	$ 27,229	$ 54,334	$ 61,111

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Segment and Entity Wide Disclosures (Details 2) (Customer Concentration Risk [Member], Sales Revenue, Goods, Net [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended
	Apr. 30, 2014		Apr. 30, 2013	Apr. 30, 2014		Apr. 30, 2013
Revenue, Major Customer [Line Items]
Revenue	$ 120,582		$ 158,824	$ 221,044		$ 278,566
Company A [Member]
Revenue, Major Customer [Line Items]
Revenue	120,582		101,531	221,044		173,210
Company B [Member]
Revenue, Major Customer [Line Items]
Revenue		[1]	$ 57,293		[1]	$ 105,356

[1] Denotes revenue representing less than 10% of total revenue for the period

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Share-Based Compensation Expense (Details Textual) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended				0 Months Ended		6 Months Ended
	Apr. 30, 2014 Stock Options [Member]	Apr. 30, 2013 Stock Options [Member]	Apr. 30, 2014 Restricted Stock Units (RSUs) [Member]	Apr. 30, 2013 Restricted Stock Units (RSUs) [Member]	Apr. 10, 2014 2008 Plan [Member]	Apr. 30, 2014 2008 Plan [Member]	Apr. 30, 2014 2008 Plan [Member] Employee Stock Options and Stock Appreciation Rights [Member]	Apr. 30, 2014 2003 Employee Stock Purchase Plan [Member] Employee Stock [Member] period	Apr. 30, 2014 Minimum [Member] Restricted Stock Units (RSUs) [Member]	Apr. 30, 2014 Maximum [Member] Restricted Stock Units (RSUs) [Member]	Apr. 30, 2014 Maximum [Member] 2003 Employee Stock Purchase Plan [Member] Employee Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum expiration period of incentive awards							10 years
Minimum exercise price, percentage of fair market value on grant date							100.00%
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized					6.6
Shares authorized for issuance under plan (in shares)						25.1					8.2
Remaining authorized shares available for issuance (in shares)						9.2		7.3
Vesting period of service-based awards	4 years								3 years	4 years
Intrinsic value of option exercised	$ 0.7	$ 0.3
Total fair value of restricted stock units vested and converted into common stock			29.1	15.9
Weighted average fair value of each restricted stock unit granted (per share)			$ 21.95	$ 15.75
Offer period for ESPP								12 months
Number of purchase periods in offer period								2
Length of purchase period								6 months
ESPP discount percentage purchase date								85.00%
Maximum number of shares increase under ESPP (in shares)								0.6
Shares issued under ESPP (in shares)								0.5
Unrecognized share-based compensation			$ 72.4
Weighted-average period for recognition of share-based compensation (in years)			1 year 6 months 0 days

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Convertible Notes Payable (Tables)

6 Months Ended

Apr. 30, 2014

Debt Disclosure [Abstract]

Schedule of details of convertible notes

The principal balance, unamortized discount and net carrying amount of the liability and equity components of our 4.0% convertible senior notes due December 15, 2020 Notes ("2020 Notes") were as follows as of April 30, 2014:

	Liability Component						Equity Component
	Principal Balance		Unamortized Discount		Net Carrying Amount		Net Carrying Amount
4.0% Convertible Senior Notes due December 15, 2020	$	192,216	$	15,575	$	176,641	$	43,131

Schedule of carrying values and estimated fair values of convertible notes

The following table sets forth, in thousands, the carrying value and the estimated fair value of Ciena’s outstanding convertible notes:

	April 30, 2014
	Carrying Value		Fair Value(2)
4.0% Convertible Senior Notes, due March 15, 2015 (1)	187,647		214,805
0.875% Convertible Senior Notes due June 15, 2017	500,000		494,375
3.75% Convertible Senior Notes due October 15, 2018	350,000		448,875
4.0% Convertible Senior Notes due December 15, 2020 (3)	176,641		246,797
	$	1,214,288	$	1,404,852

(1) Includes unamortized bond premium related to embedded redemption feature.

(2) The convertible notes were categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its outstanding convertible notes using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

(3) Includes unamortized discount and accretion of principal.

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Other Balance Sheet Details (Details 1) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Oct. 31, 2013	Apr. 30, 2013	Oct. 31, 2012
Accrued liabilities
Warranty	$ 56,167	$ 56,303	$ 54,729	$ 55,132
Compensation, payroll related tax and benefits	64,113	98,770
Vacation	34,503	32,118
Current restructuring liabilities	677	674	2,238
Interest payable	6,179	6,186
Other	92,797	77,605
Total	$ 254,436	$ 271,656

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Earnings (Loss) Per Share Calculation

6 Months Ended

Apr. 30, 2014

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE CALCULATION

EARNINGS (LOSS) PER SHARE CALCULATION

The following table (in thousands except per share amounts) is a reconciliation of the numerator and denominator of the basic net income (loss) per common share (“Basic EPS”) and the diluted net income (loss) per potential common share (“Diluted EPS”). Because the numerator reflects net losses for the periods indicated, both Basic EPS and Diluted EPS are computed using the weighted average number of common shares outstanding. Were the numerator to reflect net income, Diluted EPS would also include, to the extent the effect is not anti-dilutive, the following: (i) common shares outstanding, (ii) shares issuable upon vesting of restricted stock units, (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method, and (iv) shares underlying Ciena’s outstanding convertible notes.

	Quarter Ended April 30,						Six Months Ended April 30,
Numerator	2013			2014			2013			2014
Net loss	$	(27,079	)	$	(10,158	)	$	(74,403	)	$	(26,094	)

	Quarter Ended April 30,		Six Months Ended April 30,
Denominator	2013	2014	2013	2014
Weighted average basic common shares outstanding	101,913	105,451	101,560	104,977
Weighted average dilutive potential common shares outstanding	101,913	105,451	101,560	104,977

	Quarter Ended April 30,						Six Months Ended April 30,
EPS	2013			2014			2013			2014
Basic EPS	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)
Diluted EPS	$	(0.27	)	$	(0.10	)	$	(0.73	)	$	(0.25	)

The following table summarizes the weighted average shares excluded from the calculation of the denominator for Basic and Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands):

	Quarter Ended April 30,		Six Months Ended April 30,
	2013	2014	2013	2014
Shares underlying stock options and restricted stock units	4,267	3,256	4,366	3,430
0.25% Convertible Senior Notes due May 1, 2013	5,288	—	5,379	—
4.0% Convertible Senior Notes due March 15, 2015	9,198	9,198	11,891	9,198
0.875% Convertible Senior Notes due June 15, 2017	13,108	13,108	13,108	13,108
3.75% Convertible Senior Notes due October 15, 2018	17,356	17,356	17,356	17,356
4.0% Convertible Senior Notes due December 15, 2020	9,198	9,198	6,505	9,198
Total shares excluded due to anti-dilutive effect	58,415	52,116	58,605	52,290

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Restructuring Costs (Tables)

6 Months Ended

Apr. 30, 2014

Restructuring and Related Activities [Abstract]

Activity and balance of the restructuring liability accounts

The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the six months ended April 30, 2014 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2013	$	80		$	1,936		$	2,016
Additional liability recorded	106			9			115
Cash payments	(136		)	(178		)	(314		)
Balance at April 30, 2014	$	50		$	1,767		$	1,817
Current restructuring liabilities	$	50		$	627		$	677
Non-current restructuring liabilities	$	—		$	1,140		$	1,140

The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the six months ended April 30, 2013 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2012	$	1,449		$	3,600		$	5,049
Additional liability recorded	4,916			1,623			6,539
Non-cash disposal	—			(735		)	(735		)
Cash payments	(5,733		)	(2,153		)	(7,886		)
Balance at April 30, 2013	$	632		$	2,335		$	2,967
Current restructuring liabilities	$	632		$	1,606		$	2,238
Non-current restructuring liabilities	$	—		$	729		$	729

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Other Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Oct. 31, 2013
Other Intangible Assets
Gross Intangible	$ 787,944		$ 787,944
Accumulated Amortization	(632,827)		(602,116)
Net Intangible	155,117		185,828
Expected future amortization of finite-lived intangible assets
2014 (remaining six months)	26,439
2015	52,879
2016	52,879
2017	22,783
2018	137
Other Intangible Assets (Textuals) [Abstract]
Amortization of intangible assets excluding amortization included in property, plant and equipment	30,712	35,661
Developed Technology [Member]
Other Intangible Assets
Gross Intangible	417,833		417,833
Accumulated Amortization	(338,428)		(321,645)
Net Intangible	79,405		96,188
Patents And Licenses [Member]
Other Intangible Assets
Gross Intangible	46,538		46,538
Accumulated Amortization	(45,826)		(45,744)
Net Intangible	712		794
Customer Relationships, Covenants Not To Compete, Outstanding Purchase Orders And Contracts [Member]
Other Intangible Assets
Gross Intangible	323,573		323,573
Accumulated Amortization	(248,573)		(234,727)
Net Intangible	$ 75,000		$ 88,846

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Short-term and Long-term Investments (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Apr. 30, 2014	Oct. 31, 2013
Long Term Investments
Estimated Fair Value	$ 105,091
U.S. government obligations [Member]
Long Term Investments
Amortized Cost	75,039	114,970
Gross Unrealized Gains	61	46
Gross Unrealized Losses	0	0
Estimated Fair Value	75,100	115,016
Commercial paper [Member]
Long Term Investments
Amortized Cost	29,991	24,994
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	29,991	24,994
Short-term investments [Member] | U.S. government obligations [Member]
Long Term Investments
Amortized Cost	60,042	99,974
Gross Unrealized Gains	16	11
Gross Unrealized Losses	0	0
Estimated Fair Value	60,058	99,985
Short-term investments [Member] | Commercial paper [Member]
Long Term Investments
Amortized Cost	29,991	24,994
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	29,991	24,994
Other Long-term investments [Member] | U.S. government obligations [Member]
Long Term Investments
Amortized Cost	14,997	14,996
Gross Unrealized Gains	45	35
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 15,042	$ 15,031

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Apr. 30, 2014	Oct. 31, 2013
Stockholders' equity (deficit):
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	20,000,000	20,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	290,000,000	290,000,000
Common stock, shares issued (in shares)	105,584,958	103,705,709
Common stock, shares outstanding (in shares)	105,584,958	103,705,709

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Short-term and Long-term Investments

6 Months Ended

Apr. 30, 2014

Investments, Debt and Equity Securities [Abstract]

SHORT-TERM AND LONG-TERM INVESTMENTS

SHORT-TERM AND LONG-TERM INVESTMENTS

As of the dates indicated, short-term and long-term investments are comprised of the following (in thousands):

	April 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	60,042	$	16	—		$	60,058
Included in long-term investments	14,997		45		—		15,042
	$	75,039	$	61	$	—	$	75,100
Commercial paper:
Included in short-term investments	29,991		—		—		29,991
	$	29,991	$	—	$	—	$	29,991

	October 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	99,974	$	11	$	—	$	99,985
Included in long-term investments	14,996		35		—		15,031
	$	114,970	$	46	$	—	$	115,016
Commercial paper:
Included in short-term investments	24,994		—		—		24,994
	$	24,994	$	—	$	—	$	24,994

The following table summarizes final legal maturities of debt investments at April 30, 2014 (in thousands):

	Amortized Cost		Estimated Fair Value
Less than one year	$	90,033	$	90,049
Due in 1-2 years	14,997		15,042
	$	105,030	$	105,091

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Earnings (Loss) Per Share Calculation (Details 1) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	52,116	58,415	52,290	58,605
0.25% Convertible Senior Notes due May 1, 2013 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes	0.25%		0.25%
4.0% Convertible Senior Notes due March 15, 2015 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes	4.00%		4.00%
0.875% Convertible Senior Notes due June 15, 2017 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes	0.875%		0.875%
3.75% Convertible Senior Notes due October 15, 2018 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes	3.75%		3.75%
4.0% Convertible Senior Notes due December 15, 2020 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes	4.00%		4.00%
Shares Underlying Stock Options and Restricted Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	3,256	4,267	3,430	4,366
Convertible Senior Notes [Member] | 0.25% Convertible Senior Notes due May 1, 2013 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	0	5,288	0	5,379
Convertible Senior Notes [Member] | 4.0% Convertible Senior Notes due March 15, 2015 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	9,198	9,198	9,198	11,891
Convertible Senior Notes [Member] | 0.875% Convertible Senior Notes due June 15, 2017 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	13,108	13,108	13,108	13,108
Convertible Senior Notes [Member] | 3.75% Convertible Senior Notes due October 15, 2018 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	17,356	17,356	17,356	17,356
Convertible Senior Notes [Member] | 4.0% Convertible Senior Notes due December 15, 2020 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	9,198	9,198	9,198	6,505

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Commitments and Contingencies (Details 2) (Graywire LLC [Member])	0 Months Ended
	Mar. 16, 2012 claim	May 29, 2008 defendant
Graywire LLC [Member]
Loss Contingencies [Line Items]
Number of defendants other than reporting entity		4
Number of claims settled	2

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Short-term and Long-term Investments (Tables)

6 Months Ended

Apr. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Short-term and long-term investments

As of the dates indicated, short-term and long-term investments are comprised of the following (in thousands):

	April 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	60,042	$	16	—		$	60,058
Included in long-term investments	14,997		45		—		15,042
	$	75,039	$	61	$	—	$	75,100
Commercial paper:
Included in short-term investments	29,991		—		—		29,991
	$	29,991	$	—	$	—	$	29,991

	October 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	99,974	$	11	$	—	$	99,985
Included in long-term investments	14,996		35		—		15,031
	$	114,970	$	46	$	—	$	115,016
Commercial paper:
Included in short-term investments	24,994		—		—		24,994
	$	24,994	$	—	$	—	$	24,994

Legal maturities of debt investments

The following table summarizes final legal maturities of debt investments at April 30, 2014 (in thousands):

	Amortized Cost		Estimated Fair Value
Less than one year	$	90,033	$	90,049
Due in 1-2 years	14,997		15,042
	$	105,030	$	105,091

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Interim Financial Statements (Details)	6 Months Ended
	Apr. 30, 2014
Quarterly Financial Data [Abstract]
Fiscal year	52 or 53-week fiscal year

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Credit Facility

6 Months Ended

Apr. 30, 2014

Debt Disclosure [Abstract]

CREDIT FACILITY

CREDIT FACILITY

During fiscal 2012, Ciena entered into a $150.0 million senior secured asset-based revolving credit facility (the “Credit Facility”). The Credit Facility matures on August 13, 2015, provided that it will mature early on December 15, 2014, if any of Ciena's 4.0% senior convertible notes due March 15, 2015 are then outstanding. Ciena principally uses and expects to continue to use the Credit Facility to support the issuance of letters of credit that arise in the ordinary course of its business and thereby to reduce its use of cash required to collateralize these instruments. As of April 30, 2014, letters of credit totaling $58.7 million were collateralized by the Credit Facility. There were no borrowings outstanding under the Credit Facility as of April 30, 2014.