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 January 31, 2018

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: 001-36250

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, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o
			Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition

period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act 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 March 5, 2018
common stock, $0.01 par value	143,586,925

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 Ended January 31, 2018 and January 31, 2017	3
Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended January 31, 2018 and January 31, 2017	4
Condensed Consolidated Balance Sheets at January 31, 2018 and October 31, 2017	5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2018 and January 31, 2017	6
Condensed Consolidated Statement of Changes in Stockholders' Equity for the Quarters Ended January 31, 2018 and January 31, 2017	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	37
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	38
Item 6. Exhibits	39
Signatures	40

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Quarter Ended January 31,
	2018			2017
Revenue:
Products	$	525,609		$	506,993
Services	120,526			114,504
Total revenue	646,135			621,497
Cost of goods sold:
Products	313,120			286,811
Services	61,250			60,901
Total cost of goods sold	374,370			347,712
Gross profit	271,765			273,785
Operating expenses:
Research and development	118,524			116,869
Selling and marketing	88,515			85,002
General and administrative	38,406			35,864
Amortization of intangible assets	3,623			14,551
Significant asset impairments and restructuring costs	5,961			2,395
Total operating expenses	255,029			254,681
Income from operations	16,736			19,104
Interest and other income (loss), net	1,575			370
Interest expense	(13,734		)	(15,203		)
Income before income taxes	4,577			4,271
Provision for income taxes	477,940			410
Net income (loss)	$	(473,363	)	$	3,861
Basic net income (loss) per common share	$	(3.29	)	$	0.03
Diluted net income (loss) per potential common share	$	(3.29	)	$	0.03
Weighted average basic common shares outstanding	143,922			140,682
Weighted average dilutive potential common shares outstanding	143,922			142,184

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

3

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Quarter Ended January 31,
	2018			2017
Net income (loss)	$	(473,363	)	$	3,861
Change in unrealized loss on available-for-sale securities, net of tax	(261		)	(249		)
Change in unrealized gain on foreign currency forward contracts, net of tax	1,553			1,425
Change in unrealized gain on forward starting interest rate swap, net of tax	3,898			4,492
Change in cumulative translation adjustments	8,202			490
Other comprehensive income	13,392			6,158
Total comprehensive income (loss)	$	(459,971	)	$	10,019

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)

	January 31, 2018			October 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	648,867		$	640,513
Short-term investments	278,743			279,133
Accounts receivable, net of allowance for doubtful accounts of $17.6 million as of January 31, 2018 and October 31, 2017, respectively.	553,724			622,183
Inventories	255,251			267,143
Prepaid expenses and other	186,837			197,339
Total current assets	1,923,422			2,006,311
Long-term investments	59,151			49,783
Equipment, building, furniture and fixtures, net	318,835			308,465
Goodwill	267,899			267,458
Other intangible assets, net	96,485			100,997
Deferred tax asset, net	739,446			1,155,104
Other long-term assets	64,146			63,593
Total assets	$	3,469,384		$	3,951,711
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	209,243		$	260,098
Accrued liabilities and other short-term obligations	268,164			322,934
Deferred revenue	103,216			102,418
Current portion of long-term debt	352,753			352,293
Total current liabilities	933,376			1,037,743
Long-term deferred revenue	79,297			82,589
Other long-term obligations	115,970			111,349
Long-term debt, net	584,601			583,688
Total liabilities	$	1,713,244		$	1,815,369
Commitments and contingencies (Note 17)
Stockholders’ equity:
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; 144,180,782 and 143,043,227 shares issued and outstanding	1,442			1,430
Additional paid-in capital	6,828,648			6,810,182
Accumulated other comprehensive income (loss)	2,375			(11,017		)
Accumulated deficit	(5,076,325		)	(4,664,253		)
Total stockholders’ equity	1,756,140			2,136,342
Total liabilities and stockholders’ equity	$	3,469,384		$	3,951,711

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

5

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended January 31,
	2018			2017
Cash flows provided by (used in) operating activities:
Net income (loss)	$	(473,363	)	$	3,861
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	20,833			16,699
Share-based compensation costs	12,393			12,825
Amortization of intangible assets	5,912			18,864
Deferred tax provision	476,897			—
Provision for inventory excess and obsolescence	6,804			5,431
Provision for warranty	4,657			553
Other	2,269			4,452
Changes in assets and liabilities:
Accounts receivable	72,439			(21,956		)
Inventories	5,199			(78,749		)
Prepaid expenses and other	16,120			(1,004		)
Accounts payable, accruals and other obligations	(111,476		)	4,037
Deferred revenue	(2,981		)	8,737
Net cash provided by (used in) operating activities	35,703			(26,250		)
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property	(25,662		)	(25,706		)
Purchase of available for sale securities	(118,877		)	(89,897		)
Proceeds from maturities of available for sale securities	110,000			95,000
Settlement of foreign currency forward contracts, net	1,061			440
Net cash used in investing activities	(33,478		)	(20,163		)
Cash flows provided by (used in) financing activities:
Payment of long-term debt	(1,000		)	(46,296		)
Payment of capital lease obligations	(914		)	(605		)
Repurchases of common stock-repurchase program	(4,103		)	—
Proceeds from issuance of common stock	11,008			9,708
Net cash provided by (used in) financing activities	4,991			(37,193		)
Effect of exchange rate changes on cash and cash equivalents	1,138			(156		)
Net increase (decrease) in cash and cash equivalents	8,354			(83,762		)
Cash and cash equivalents at beginning of period	640,513			777,615
Cash and cash equivalents at end of period	$	648,867		$	693,853
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	10,020		$	11,831
Cash paid during the period for income taxes, net	$	3,498		$	5,521
Non-cash investing activities
Purchase of equipment in accounts payable	$	2,014		$	5,293
Non-cash financing activities
Repurchase of common stock in accrued liabilities from repurchase program	$	1,652		$	—

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

6

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

	Common Stock Shares		Par Value			Additional Paid-in-Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at October 31, 2017	143,043,227		$	1,430		$	6,810,182		$	(11,017	)	$	(4,664,253	)	$	2,136,342
Net loss	—		—			—			—			(473,363		)	(473,363		)
Other comprehensive income	—		—			—			13,392			—			13,392
Repurchase of common stock	(262,487	)	(3		)	(5,752		)	—			—			(5,755		)
Issuance of shares from employee equity plans	1,400,042		15			10,993			—			—			11,008
Share-based compensation expense	—		—			12,393			—			—			12,393
Effect of adoption of new accounting standards	—		—			832			—			61,291			62,123
Balance at January 31, 2018	144,180,782		$	1,442		$	6,828,648		$	2,375		$	(5,076,325	)	$	1,756,140

	Common Stock Shares	Par Value		Additional Paid-in-Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at October 31, 2016	139,767,627	$	1,398	$	6,715,478	$	(24,329	)	$	(5,926,206	)	$	766,341
Net income	—	—		—		—			3,861			3,861
Other comprehensive income	—	—		—		6,158			—			6,158
Issuance of shares from employee equity plans	1,494,979	15		9,693		—			—			9,708
Share-based compensation expense	—	—		12,825		—			—			12,825
Balance at January 31, 2017	141,262,606	$	1,413	$	6,737,996	$	(18,171	)	$	(5,922,345	)	$	798,893

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

7

CIENA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1)  INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein for Ciena Corporation and its wholly owned subsidiaries (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "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 accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of October 31, 2017 was derived from audited financial statements, but does not include all disclosures required by GAAP. 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, 2017.

Ciena has a 52 or 53-week fiscal year, with quarters ending on the Saturday nearest to the last day of January, April, July and October, respectively, of each year. Fiscal 2018 is a 53-week fiscal year with the additional week occurring in the fourth quarter. Fiscal 2017 was a 52-week fiscal year. 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)  RECENT ACCOUNTING PRONOUNCEMENTS

Except for the changes in certain policies related to adoption of the accounting standards described below, there have been no material changes to Ciena's significant accounting policies, compared to the accounting policies described in Note 1, Ciena Corporation and Significant Accounting Policies and Estimates, in Notes to Consolidated Financial Statements in Item 8 of Part II of Ciena's annual report on Form 10-K for the fiscal year ended October 31, 2017.

Newly Issued Accounting Standards - Effective

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01 ("ASU 2017-01"), Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition or disposal of assets or businesses. The amendments in this update provide a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. Ciena will evaluate the effect of the update at the time of any future acquisition or disposal. Ciena adopted ASU 2017-01 during the first quarter of fiscal 2018.

In August 2017, the FASB issued ASU No. 2017-12 ("ASU 2017-12"), Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships, through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. Ciena adopted ASU 2017-12 during the first quarter of fiscal 2018. For hedges for which Ciena has elected to exclude the spot-forward difference from assessment of effectiveness, Ciena has elected to amortize the difference on a straight-line basis. Ciena will record amortization in earnings each period with an offsetting entry to other comprehensive income, and all changes in fair value over the term of the derivative in other comprehensive income. The application of this accounting standard did not have a material impact on Ciena's Condensed Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-09 ("ASU 2016-09"), Improvements to Employee Share-Based Payment Accounting, which provides guidance on several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. ASU 2016-09 is effective for Ciena beginning in the first quarter of fiscal 2018. In connection with the adoption

8

of this guidance, Ciena recognized approximately $62.1 million of deferred tax assets related to previously unrecognized tax benefits. This was recorded as a cumulative-effect adjustment to retained earnings as of the beginning of the first quarter of fiscal 2018. Additionally, the consolidated statements of cash flows will include excess tax benefits as an operating activity, on a prospective basis as a result of the adoption. Finally, Ciena has elected to recognize forfeitures when they occur, rather than to estimate the impact of forfeitures when the award is granted. Accordingly, Ciena recognized approximately $0.8 million for this change through a cumulative effect adjustment recorded to opening retained earnings in the first quarter of fiscal 2018.

Newly Issued Accounting Standards - Not Yet Effective

In May 2014, the FASB issued ASU No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition. ASU 2014-09 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. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. 

For multiple element software arrangements where vendor-specific objective evidence ("VSOE") of undelivered maintenance does not exist, Ciena currently recognizes revenue for the entire arrangement over the maintenance term. Ciena expects that the adoption of ASU 2014-09 will require that it determine the stand alone selling price for each of the software and software-related deliverables at contract inception, and Ciena consequently expects certain software deliverables will be recognized at a point in time rather than over a period of time.

Ciena also expects certain installation and deployment, and consulting and network design services, will be recognized over a period of time rather than at a point in time.

Ciena has considered the impact of the guidance in Accounting Standards Codification ("ASC") 340-40, Other Assets and Deferred Costs; Contracts with Customers, and the interpretations of the FASB Transition Resource Group for Revenue Recognition (TRG) with respect to capitalization and amortization of incremental costs of obtaining a contract. In conjunction with this interpretation, Ciena has elected to implement the practical expedient clause allowing for incremental costs to be recognized as an expense when incurred if the period of the asset recognition is one year or less, and amortized over the period of performance, if the period of the asset recognition is greater than one year.   

Ciena expects to implement this standard using the modified retrospective approach whereby the cumulative effect at adoption will be presented as an adjustment to the opening balance of retained earnings. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for those periods. ASU 2014-09 will be effective for Ciena beginning in the first quarter of fiscal 2019. Ciena is continuing to evaluate other possible impacts of the adoption of this ASU on its Consolidated Financial Statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"), Leases, which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and to provide additional disclosures. ASU 2016-02 is effective for Ciena beginning in the first quarter of fiscal 2020. Under current GAAP, the majority of Ciena’s leases for its properties are considered operating leases, and Ciena expects that the adoption of this ASU will require these leases to be classified as financing leases and to be recognized as assets and liabilities on Ciena’s balance sheet. Ciena is continuing to evaluate other possible impacts of the adoption of ASU 2016-02 on its Consolidated Financial Statements and disclosures.

(3) RESTRUCTURING COSTS

Ciena has undertaken a number of restructuring activities intended to reduce expense and to 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 three months ended January 31, 2018 (in thousands):

9

	Workforce reduction				Consolidation of excess facilities				Total
Balance at October 31, 2017	$	1,291			$	1,648			$	2,939
Additional liability recorded	4,413			(1)	1,548			(2)	5,961
Cash payments	(4,459		)		(1,282		)		(5,741		)
Balance at January 31, 2018	$	1,245			$	1,914			$	3,159
Current restructuring liabilities	$	1,245			$	590			$	1,835
Non-current restructuring liabilities	$	—			$	1,324			$	1,324

(1) Reflects a global workforce reduction of approximately 100 employees during the first quarter of fiscal 2018 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

(2) Reflects unfavorable lease commitments in connection with a portion of facilities located in Petaluma, California.

The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the three months ended January 31, 2017 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2016	$	868		$	1,970		$	2,838
Additional liability recorded	2,008			387			2,395
Cash payments	(2,512		)	(652		)	(3,164		)
Balance at January 31, 2017	$	364		$	1,705		$	2,069
Current restructuring liabilities	$	364		$	1,269		$	1,633
Non-current restructuring liabilities	$	—		$	436		$	436

(4) INTEREST AND OTHER INCOME (LOSS), NET

The components of interest and other income (loss), net, are as follows (in thousands):

	Quarter Ended January 31,
	2018			2017
Interest income	$	2,444		$	1,282
Gains (losses) on non-hedge designated foreign currency forward contracts	(699		)	1,024
Foreign currency exchange gain (loss)	13			(2,417		)
Other	(183		)	481
Interest and other income (loss), net	$	1,575		$	370

Ciena Corporation, as the U.S. parent entity, uses the U.S. Dollar as its functional currency; however, some of its foreign branch offices and subsidiaries use local currencies as their functional currencies. During the first three months of fiscal 2017, Ciena recorded $2.4 million in foreign currency exchange rate losses as a result of monetary assets and liabilities that were transacted in a currency other than the entity's functional currency, and the remeasurement adjustments were recorded in interest and other income (loss), net on the Condensed Consolidated Statements of Operations. From time to time, Ciena uses foreign currency forwards to hedge these 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 Statements of Operations. During the first three months of fiscal 2018, Ciena recorded losses of $0.7 million from non-hedge designated foreign currency forward contracts. During the first three months of fiscal 2017, Ciena recorded gains of $1.0 million from non-hedge designated foreign currency forward contracts.

(5)  INCOME TAXES

10

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted. The Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate income tax rate (“federal tax rate”) from 35% to 21% effective January 1, 2018, implementing a modified territorial tax system, and imposing a mandatory one-time transition tax on accumulated earnings of foreign subsidiaries that were previously tax deferred. As a fiscal-year taxpayer, certain provisions of the Tax Act impact Ciena in fiscal 2018, including the change in the federal tax rate and the one-time transition tax, while other provisions will be effective at the beginning of fiscal 2019, including the implementation of a modified territorial tax system, other changes to how foreign earnings are subject to U.S. tax, and adoption of an alternative tax system.

As a result of the decrease in the federal tax rate from 35% to 21% effective January 1, 2018, Ciena has computed its income tax expense for the October 31, 2018 fiscal year using a blended federal tax rate of 23.4%. The 21% federal tax rate will apply to Ciena’s fiscal year ending October 31, 2019 and each year thereafter. Ciena remeasured its deferred tax assets and liabilities ("DTA") using the federal tax rate that will apply when the related temporary differences are expected to reverse.

During the three months ended January 31, 2018, Ciena recorded a provisional tax expense of $477.9 million, primarily related to the Tax Act and comprised of $431.3 million remeasurement of net DTA and $45.6 million of U.S. transition tax.

In December 2017, the SEC issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes due to the Tax Act. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. The final impact of the Tax Act may differ from the above provisional amounts due to changes in interpretations of the Tax Act, legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes and related interpretations in response to the Tax Act, and any updates or changes to estimates used in the provisional amounts. Ciena has determined that the $45.6 million of tax expense for the U.S. transition tax on accumulated earnings of foreign subsidiaries and the $431.3 million of tax expense for DTA remeasurement were each provisional amounts and reasonable estimates as of January 31, 2018. Estimates used in the provisional amounts include the anticipated reversal pattern of the gross DTAs plus the earnings and profits, cash position at the end of fiscal year 2018, foreign taxes and withholding taxes attributable to foreign subsidiaries.

Ciena currently intends to reinvest indefinitely its foreign earnings outside the U.S. However, Ciena intends to further study changes enacted by the Tax Act, costs of repatriation and the current and future cash needs of foreign operations to determine whether there is an opportunity to repatriate these earnings in the future on a tax-efficient basis. If Ciena determines to repatriate these earnings, the provisional amount of unrecognized deferred income tax liability related to these foreign withholding taxes would be approximately $22.0 million. There are no other significant temporary differences for which a deferred tax liability has not been recognized.

The significant components of DTA are as follows (in thousands):

	January 31,			October 31,
	2018			2017
Deferred tax assets:
Reserves and accrued liabilities	$	36,706		$	56,597
Depreciation and amortization	274,974			451,385
NOL and credit carry forward	560,603			803,622
Other	18,224			29,398
Gross deferred tax assets	890,507			1,341,002
Valuation allowance	(151,061		)	(185,898		)
Deferred tax asset, net of valuation allowance	$	739,446		$	1,155,104

In connection with the adoption of ASU 2016-09, Ciena recognized approximately $62.1 million of deferred tax assets related to previously unrecognized tax benefits. This was recorded as a cumulative-effect adjustment to retained earnings as of the beginning of the first quarter of fiscal 2018. See Note 2 above and Note 14 below. As of January 31, 2018, Ciena continues to maintain a valuation allowance of $151.1 million. This valuation allowance is primarily related to state and foreign net operating losses and credits that Ciena estimates it will not be able to use.

(6) SHORT-TERM AND LONG-TERM INVESTMENTS

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

11

	January 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	239,404	$	—	(530		)	$	238,874
Included in long-term investments	59,313		—		(162		)	59,151
	$	298,717	$	—	$	(692	)	$	298,025
Commercial paper:
Included in short-term investments	$	39,868	1		—			$	39,869
	$	39,868	$	1	$	—		$	39,869

	October 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	249,498	$	—	$	(305	)	$	249,193
Included in long-term investments	49,910		—		(127		)	49,783
	$	299,408	$	—	$	(432	)	$	298,976
Commercial paper:
Included in short-term investments	$	29,939	1		—			$	29,940
	$	29,939	$	1	$	—		$	29,940

The following table summarizes the final legal maturities of debt investments at January 31, 2018 (in thousands):

	Amortized Cost		Estimated Fair Value
Less than one year	$	279,272	$	278,743
Due in 1-2 years	59,313		59,151
	$	338,585	$	337,894

(7) FAIR VALUE MEASUREMENTS

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

12

	January 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	521,698	$	—	$	—	$	521,698
U.S. government obligations	—		298,025		—		298,025
Commercial paper	—		69,810		—		69,810
Foreign currency forward contracts	—		3,730		—		3,730
Forward starting interest rate swaps	—		4,117		—		4,117
Total assets measured at fair value	$	521,698	$	375,682	$	—	$	897,380
Liabilities:
Foreign currency forward contracts	$	—	$	2,415	$	—	$	2,415
Total liabilities measured at fair value	$	—	$	2,415	$	—	$	2,415

	October 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	511,355	$	—	$	—	$	511,355
U.S. government obligations	—		298,976		—		298,976
Commercial paper	—		89,865		—		89,865
Foreign currency forward contracts	—		227		—		227
Forward starting interest rate swaps	—		218		—		218
Total assets measured at fair value	$	511,355	$	389,286	$	—	$	900,641
Liabilities:
Foreign currency forward contracts	$	—	$	2,129	$	—	$	2,129
Total liabilities measured at fair value	$	—	$	2,129	$	—	$	2,129

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

	January 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	521,698	$	29,941	$	—	$	551,639
Short-term investments	—		278,743		—		278,743
Prepaid expenses and other	—		3,730		—		3,730
Long-term investments	—		59,151		—		59,151
Other long-term assets	—		4,117		—		4,117
Total assets measured at fair value	$	521,698	$	375,682	$	—	$	897,380
Liabilities:
Accrued liabilities	$	—	$	2,415	$	—	$	2,415
Total liabilities measured at fair value	$	—	$	2,415	$	—	$	2,415

13

	October 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	511,355	$	59,925	$	—	$	571,280
Short-term investments	—		279,133		—		279,133
Prepaid expenses and other	—		227		—		227
Long-term investments	—		49,783		—		49,783
Other long-term assets	—		218		—		218
Total assets measured at fair value	$	511,355	$	389,286	$	—	$	900,641
Liabilities:
Accrued liabilities	$	—	$	2,129	$	—	$	2,129
Total liabilities measured at fair value	$	—	$	2,129	$	—	$	2,129

Ciena did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

(8) INVENTORIES

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

	January 31, 2018			October 31, 2017
Raw materials	$	47,710		$	52,898
Work-in-process	16,444			18,623
Finished goods	176,426			185,488
Deferred cost of goods sold	64,445			61,340
	305,025			318,349
Provision for excess and obsolescence	(49,774		)	(51,206		)
	$	255,251		$	267,143

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 three months of fiscal 2018, Ciena recorded a provision for excess and obsolescence of $6.8 million, primarily related to a decrease in the forecasted demand for certain Networking Platforms products. Deductions from the provision for excess and obsolete inventory relate primarily to disposal activities.

(9) ACCRUED LIABILITIES AND OTHER SHORT-TERM OBLIGATIONS

As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands):

	January 31, 2018		October 31, 2017
Compensation, payroll related tax and benefits(1)	$	68,526	$	113,272
Warranty	42,526		42,456
Vacation	39,628		39,778
Capital lease obligations	3,934		3,772
Interest payable	4,867		3,612
Other	108,683		120,044
	$	268,164	$	322,934

(1) Reduction is primarily due to the timing of bonus payments to employees under Ciena's annual cash incentive compensation plan.

14

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

Three Months Ended January 31,	Beginning Balance		Current Period Provisions (1)	Settlements		Ending Balance
2017	$	52,324	553	(4,225	)	$	48,652
2018	$	42,456	4,657	(4,587	)	$	42,526

(1) As a result of lower than expected actual failure rates, Ciena adjusted its fiscal 2017 provision for warranty. These adjustments for previous years provisions had the effect of reducing warranty provision by $3.6 million for the three months ended January 31, 2017.

(10) DERIVATIVE INSTRUMENTS

Foreign Currency Derivatives   

As of January 31, 2018 and October 31, 2017, Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce the variability in its Canadian Dollar and Indian Rupee denominated expense, which principally relates to research and development activities, and its Euro denominated revenue. The notional amount of these contracts was approximately $187.3 million and $86.1 million as of January 31, 2018 and October 31, 2017, respectively. These foreign exchange contracts have maturities of 12 months or less and have been designated as cash flow hedges.

During the first three months of fiscal 2018 and fiscal 2017, in order to hedge certain balance sheet exposures, Ciena entered into forward contracts to mitigate risk due to volatility in the Brazilian Real, Canadian Dollar and Mexican Peso. The notional amount of these contracts was approximately $82.7 million and $83.4 million as of January 31, 2018 and October 31, 2017, respectively. These foreign exchange contracts have maturities of 12 months or less and have not been designated as hedges for accounting purposes.

Interest Rate Derivatives

Ciena is exposed to floating rates of LIBOR interest on its term loan borrowings (see Note 12 below) and has hedged such risk by entering into floating to fixed interest rate swap arrangements ("interest rate swaps"). The interest rate swaps fix 98%, 82%, and 77% of the principal value of the 2022 Term Loan from February 2017 through July 2018, July 2018 through June 2020, and June 2020 through January 2021, respectively. The fixed rate on the amounts hedged during these periods will be 4.25%, 4.25% ,and 4.75%, respectively. The total notional amount of these interest rate swaps in effect as of January 31, 2018 was $388.6 million. The total notional amount of these interest rate swaps in effect as of October 31, 2017 was $389.6 million.

Ciena expects the variable rate payments to be received under the terms of the interest rate swaps to offset exactly the forecasted variable rate payments on the equivalent notional amounts of the term loans. These derivative contracts have been designated as cash flow hedges.

Other information regarding Ciena's derivatives is immaterial for separate financial statement presentation. See Note 4 and Note 7 above.

(11) ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changesin accumulated balances of other comprehensive income ("AOCI") for the three months ended January 31, 2018:

15

	Unrealized Loss on			Unrealized Gain/(Loss) on			Unrealized Gain on Forward		Cumulative Foreign Currency
	Marketable Securities			Foreign Currency Contracts			Starting Interest Rate Swap		Translation Adjustment			Total
Balance at October 31, 2017	$	(451	)	$	(1,386	)	$	218	$	(9,398	)	$	(11,017	)
Other comprehensive income (loss) before reclassifications	(261		)	1,624			3,479		8,202			13,044
Amounts reclassified from AOCI	—			(71		)	419		—			348
Balance at January 31, 2018	$	(712	)	$	167		$	4,116	$	(1,196	)	$	2,375

The following table summarizes the changesin AOCI for the three months ended January 31, 2017:

	Unrealized Gain/(Loss) on			Unrealized Gain/(Loss) on			Unrealized Gain/(Loss) on Forward			Cumulative Foreign Currency
	Marketable Securities			Foreign Currency Contracts			Starting Interest Rate Swap			Translation Adjustment			Total
Balance at October 31, 2016	$	139		$	(1,091	)	$	(5,967	)	$	(17,410	)	$	(24,329	)
Other comprehensive income (loss) before reclassifications	(249		)	1,031			4,044			490			5,316
Amounts reclassified from AOCI	—			394			448			—			842
Balance at January 31, 2017	$	(110	)	$	334		$	(1,475	)	$	(16,920	)	$	(18,171	)

All amounts reclassified from AOCI related to settlement (gains) losses on foreign currency forward contracts designated as cash flow hedges impacted revenue or research and development expense on the Condensed Consolidated Statements of Operations. All amounts reclassified from AOCI related to settlement (gains) losses on forward starting interest rate swaps designated as cash flow hedges impacted interest and other income (loss), net on the Condensed Consolidated Statements of Operations.

(12)  SHORT-TERM AND LONG-TERM DEBT

Outstanding Term Loan Payable

2022 Term Loan

The net carrying value of Ciena's Term Loan due January 30, 2022 (the "2022 Term Loan") was comprised of the following for the fiscal periods indicated (in thousands):

	January 31, 2018		October 31, 2017
Term Loan Payable due January 30, 2022	$	392,269	$	392,972

Deferred debt issuance costs that were deducted from the carrying amounts of the 2022 Term Loan totaled $2.9 million at January 31, 2018 and $3.1 million at October 31, 2017. 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 2022 Term Loan. The amortization of deferred debt issuance costs for the 2022 Term Loan is included in interest expense, and was $0.2 million during the first three months of fiscal 2018. There was no recorded amortization of deferred debt issuance costs for the 2022 Term Loan included in interest expense during the first three months of fiscal 2017. The carrying values of the 2022 Term Loan listed above are also net of any unamortized debt discounts.    

16

The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability components of Ciena's 2022 Term Loan were as follows as of January 31, 2018 (in thousands):

	Principal Balance		Unamortized Debt Discount			Deferred Debt Issuance Costs			Net Carrying Value
Term Loan Payable due January 30, 2022	$	397,000	$	(1,808	)	$	(2,923	)	$392,269

The following table sets forth the carrying value and the estimated fair value of Ciena's 2022 Term Loan (in thousands):

	January 31, 2018
	Carrying Value		Fair Value(1)
Term Loan Payable due January 30, 2022	$	392,269	$	397,993

(1) Ciena's term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2022 Term Loan using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

Outstanding Convertible Notes Payable

The net carrying values of Ciena's outstanding convertible notes payable was comprised of the following for the fiscal periods indicated (in thousands):

	January 31, 2018		October 31, 2017
3.75% Convertible Senior Notes due October 15, 2018 (Original)	$	61,125	$	61,071
3.75% Convertible Senior Notes due October 15, 2018 (New)	287,627		287,221
4.0% Convertible Senior Notes due December 15, 2020	196,333		194,717
	$	545,085	$	543,009

Deferred debt issuance costs that were deducted from the carrying amounts of the convertible notes payable totaled $1.7 million at January 31, 2018 and $2.1 million at October 31, 2017. 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 convertible notes payable. The amortization of deferred debt issuance costs is included in interest expense, and was $0.4 million and $0.5 million during the first three months of fiscal 2018 and 2017, respectively. The carrying values of the convertible notes payable listed above also include accretion of principal and are net of any unamortized debt discounts.

The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability and equity components of Ciena's outstanding issues of convertible notes were as follows as of January 31, 2018 (in thousands):

	Liability Component										Equity Component
	Principal Balance		Unamortized Debt Discount			Deferred Debt Issuance Costs			Net Carrying Value		Net Carrying Value
3.75% Convertible Senior Notes, due October 15, 2018 (Original)	$	61,270	$	—		$	(145	)	$	61,125	$	—
3.75% Convertible Senior Notes, due October 15, 2018 (New)	$	288,730	$	(423	)	$	(680	)	$	287,627	$	—
4.0% Convertible Senior Notes due December 15, 2020 (1)	$	205,906	$	(8,692	)	$	(881	)	$	196,333	$	43,131

(1) Includes accretion of principal at a rate of 1.85% per year

The following table sets forth, in thousands, the net carrying value and the estimated fair value of Ciena’s outstanding issues of convertible notes as of January 31, 2018:

17

	January 31, 2018
	Net Carrying Value		Fair Value(1)
3.75% Convertible Senior Notes, due October 15, 2018 (Original)	$	61,125	$	71,778
3.75% Convertible Senior Notes, due October 15, 2018 (New)	287,627		338,247
4.0% Convertible Senior Notes due December 15, 2020	196,333		246,281
	$	545,085	$	656,306

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

(13)  EARNINGS 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”). Basic EPS is computed using the weighted average number of common shares outstanding. Diluted EPS is computed using the weighted average number of the following, in each case, to the extent the effect is not anti-dilutive: (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; (iv) shares underlying Ciena’s outstanding convertible notes for which Ciena uses the treasury stock method (the New Notes); and (v) shares underlying Ciena’s outstanding convertible notes for which Ciena uses the if-converted method.

	Quarter Ended January 31,
Numerator	2018			2017
Net income (loss)	$	(473,363	)	$	3,861

	Quarter Ended January 31,
Denominator	2018	2017
Basic weighted average shares outstanding	143,922	140,682
Add: Shares underlying outstanding stock options and restricted stock units and issuable under employee stock purchase plan	—	1,502
Dilutive weighted average shares outstanding	143,922	142,184

	Quarter Ended January 31,
EPS	2018			2017
Basic EPS	$	(3.29	)	$	0.03
Diluted EPS	$	(3.29	)	$	0.03

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

	Quarter Ended January 31,
	2018	2017
Shares underlying stock options and restricted stock units	3,414	1,556
0.875% Convertible Senior Notes due June 15, 2017	—	5,564
3.75% Convertible Senior Notes due October 15, 2018 (Original)	3,038	17,355
3.75% Convertible Senior Notes due October 15, 2018 (New) (1)	691	—
4.0% Convertible Senior Notes due December 15, 2020	9,198	9,198
Total shares excluded due to anti-dilutive effect	16,341	33,673

18

(1) Since Ciena intends, upon any conversion of the outstanding 3.75% Convertible Senior Notes due 2018 (New Notes), to settle the principal amount thereof in cash, Ciena uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The 14.3 million shares underlying the New Notes will have a dilutive impact on diluted net income per share of common stock when the average market price of Ciena common stock for a given period exceeds the conversion price of $20.17 per share for the New Notes. During the first quarter of fiscal 2018, the average market price of Ciena common stock was $21.19 and, as such, the New Notes are dilutive by the conversion spread, or 0.7 million shares.

(14)  STOCKHOLDERS' EQUITY

Adoption of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting

In connection with the adoption of ASU 2016-09, Ciena recognized approximately $62.1 million of deferred tax assets related to previously unrecognized tax benefits. This was recorded as a cumulative-effect adjustment to retained earnings as of the beginning of the first quarter of fiscal 2018. Ciena also elected to recognize forfeitures of stock awards when they occur, rather than estimate the impact of forfeitures when the award is granted. Accordingly, Ciena recognized approximately $0.8 million for this change through a cumulative effect adjustment recorded to opening retained earnings in the period of adoption.

Stock Repurchase Program

On December 7, 2017, Ciena announced that its Board of Directors authorized a program to repurchase up to $300 million of Ciena’s common stock through the end of fiscal 2020. Ciena may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. Ciena may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended, or discontinued at any time.

A summary of the stock repurchase program, reported based on trade date, is summarized as follows:

	Shares Repurchased	Weighted-Average Price per Share		Amount Repurchased (in thousands)
Cumulative balance at October 31, 2017	—	$	—	$	—
Repurchase of common stock under the stock repurchase program	262,487	21.92		5,755
Cumulative balance at January 31, 2018	262,487	$	21.92	$	5,755

The purchase price for the shares of Ciena's stock repurchased is reflected as a reduction to stockholders' equity. Ciena is required to allocate the purchase price of the repurchased shares as a reduction of common stock and additional paid-in capital.

(15) SHARE-BASED COMPENSATION EXPENSE

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

	Quarter Ended January 31,
	2018		2017
Product costs	$	672	$	561
Service costs	625		628
Share-based compensation expense included in cost of sales	1,297		1,189
Research and development	3,255		3,209
Sales and marketing	3,328		2,873
General and administrative	4,474		5,453
Share-based compensation expense included in operating expense	11,057		11,535
Share-based compensation expense capitalized in inventory, net	39		101
Total share-based compensation	$	12,393	$	12,825

19

As of January 31, 2018, total unrecognized share-based compensation expense was approximately $100.1 million, consisting of: (i) $0.1 million, which relates to unvested stock options and is expected to be recognized over a weighted-average period of 0.8 years; and (ii) $100.0 million, which relates to unvested restricted stock units and is expected to be recognized over a weighted-average period of 1.7 years.

20

(16)  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:

• Networking Platforms reflects sales of Ciena’s Converged Packet Optical and Packet Networking product lines.

◦ Converged Packet Optical — includes the 6500 Packet-Optical Platform, the 5430 Reconfigurable Switching System, Waveserver stackable interconnect system, the family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform. In addition, as of the first quarter of fiscal 2018, sales of Optical Transport products are reflected within the Converged Packet Optical product line for all periods presented.

◦ Packet Networking — includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform and the Ethernet packet configuration for the 5410 Service Aggregation Switch.

The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Condensed Consolidated Statements of Operations.

• Software and Software-Related Services reflects sales of Ciena’s network virtualization, management, control and orchestration software solutions and software-related services, including subscription, installation, support, and consulting services.

◦ This segment includes Ciena’s Blue Planet network virtualization, service orchestration and network management software platform. Ciena's Blue Planet platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), and Ciena's manage, control and plan (MCP) solution, SDN Multilayer Controller and V-WAN application.

◦ This segment includes Ciena’s element and network management solutions and planning tools, including the OneControl Unified Management System, ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. As Ciena seeks adoption of its Blue Planet software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other element and network management solutions.

Revenue from the software platforms portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from software-related services is included in services revenue on the Condensed Consolidated Statements of Operations.

• Global Services reflects sales of a broad range of Ciena’s services for consulting and network design, installation and deployment, maintenance support and training activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena's long-lived assets, including equipment, building, furniture and fixtures, finite-lived intangible assets and maintenance spares, are not reviewed by Ciena's chief operating decision maker for purposes of evaluating performance and allocating resources. As of January 31, 2018, equipment, building, furniture and fixtures, net totaled $318.8 million primarily supporting asset groups within Ciena's Networking Platforms and Software and Software-Related Services segments and supporting Ciena's unallocated selling and general and administrative activities. As of January 31, 2018, $36.9 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Networking Platforms segment and $59.6 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Software and Software-Related Services segment. As of January 31, 2018, all of the maintenance spares, net, totaling $43.7 million, were assigned to asset groups within Ciena's Global Services segment.

Segment Revenue

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

21

	Quarter Ended January 31,
	2018		2017
Revenue:
Networking Platforms
Converged Packet Optical	$	427,401	$	417,750
Packet Networking	68,632		72,194
Total Networking Platforms	496,033		489,944
Software and Software-Related Services
Software Platforms	29,576		17,049
Software-Related Services	23,911		22,331
Total Software and Software-Related Services	53,487		39,380
Global Services
Maintenance Support and Training	55,958		54,990
Installation and Deployment	30,016		27,919
Consulting and Network Design	10,641		9,264
Total Global Services	96,615		92,173
Consolidated revenue	$	646,135	$	621,497

Segment Profit

Segment profit is determined based on internal performance measures used by Ciena's 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; significant asset impairments and restructuring costs; interest and other income (loss), net; interest expense; and provisions for income taxes.

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

	Quarter Ended January 31,
	2018			2017
Segment profit:
Networking Platforms	$	88,569		$	113,747
Software and Software-Related Services	23,635			7,700
Global Services	41,037			35,469
Total segment profit	153,241			156,916
Less: Non-performance operating expenses
Selling and marketing	88,515			85,002
General and administrative	38,406			35,864
Amortization of intangible assets	3,623			14,551
Significant asset impairments and restructuring costs	5,961			2,395
Add: Other non-performance financial items
Interest expense and other income (loss), net	(12,159		)	(14,833		)
Less: Provision for income taxes	477,940			410
Consolidated net income (loss)	$	(473,363	)	$	3,861

22

Entity-Wide Reporting

Ciena's revenue includes $383.4 million and $379.7 million of U.S. revenue for the first quarter of fiscal 2018 and 2017, respectively. There were no other countries that accounted for more than 10% of Ciena's revenue in the first quarter of fiscal 2018 and 2017.

The following table reflects Ciena's geographic distribution of equipment, building, furniture and fixtures, net, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, specifically identified. Equipment, building, furniture and fixtures, net, attributable to geographic regions outside of the U.S. and Canada are reflected as “Other International.” For the periods below, Ciena's geographic distribution of equipment, building, furniture and fixtures was as follows (in thousands):

	January 31, 2018		October 31, 2017
Canada	$	212,142	$	203,491
United States	86,836		90,482
Other International	19,857		14,492
Total	$	318,835	$	308,465

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

	Quarter Ended January 31,
	2018		2017
AT&T	$	90,645	$	96,437
Verizon	68,445		73,089
Total	$	159,090	$	169,526

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

(17)  COMMITMENTS AND CONTINGENCIES

Foreign Tax Contingencies

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

Litigation

As a result of the acquisition of Cyan in August 2015, Ciena became a defendant in a securities class action lawsuit. On April 1, 2014, a purported stockholder class action lawsuit was filed in the Superior Court of California, County of San Francisco, against Cyan, the members of Cyan’s board of directors, Cyan’s former Chief Financial Officer, and the underwriters of Cyan’s initial public offering. On April 30, 2014, a substantially similar lawsuit was filed in the same court against the same defendants. The two cases have been consolidated as Beaver County Employees Retirement Fund, et al. v. Cyan, Inc. et al., Case No. CGC-14-538355. The consolidated complaint alleges violations of federal securities laws on behalf of a purported class consisting of purchasers of Cyan’s common stock pursuant or traceable to the registration statement and prospectus for Cyan’s initial public offering in April 2013, and seeks unspecified compensatory damages and other relief. On May 19, 2015, the proposed class was certified. On August 25, 2015, the defendants filed a motion for judgment on the pleadings based on an alleged lack of subject matter jurisdiction over the case, which motion was denied on October 23, 2015. On May 24, 2016, the defendants filed a petition for a writ of certiorari on the jurisdiction issue with the U.S. Supreme Court, which petition was granted on June 27, 2017. On November 18, 2016, the Superior Court stayed the case pending the outcome of the Supreme Court’s decision. Oral argument was heard by the Supreme Court on this matter on November 28, 2017. Ciena believes that the consolidated lawsuit is without merit and intends to defend it vigorously.

Internal Investigations

During fiscal 2017, one of Ciena’s third-party vendors raised allegations about certain questionable payments to one or more individuals employed by a customer in a country in the ASEAN region. Ciena promptly initiated an internal investigation into the matter, with the assistance of outside counsel, which investigation corroborated direct and indirect payments to one

23

such individual and sought to determine whether the payments may have violated applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act (“FCPA”). In September 2017, Ciena voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them of the relevant events and the findings of Ciena’s internal investigation. With the direct oversight of Ciena's Board of Directors, Ciena continues to cooperate fully with the SEC and DOJ in their review of the investigation.

Ciena’s operations in the relevant country have constituted less than 1.5% of consolidated revenues as reported by Ciena in each fiscal year since 2012. Ciena does not currently anticipate that this matter will have a material adverse effect on its business, financial condition or results of operations. However, as discussions with the SEC and DOJ are ongoing, the ultimate outcome of this matter cannot be predicted at this time. As of the filing of this Report, no provision with respect to this matter has been made in Ciena’s consolidated financial statements. Any determination that Ciena’s operations or activities are not in compliance with the FCPA or other applicable laws or regulations could result in the imposition of fines, civil and criminal penalties, and equitable remedies, including disgorgement or injunctive relief.

In addition to the matters described in “Litigation” and “Internal Investigations” above, Ciena is subject to various legal proceedings, claims and other matters arising in the ordinary course of business, including those that relate to employment, commercial, tax and other regulatory matters. Ciena is also subject to intellectual property related claims, 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 such matters will have a material effect on its results of operations, financial position or cash flows.

24

(18) SUBSEQUENT EVENT

Stock Repurchase Program

From the end of the first quarter of fiscal 2018 through March 5, 2018, Ciena repurchased an additional 611,514 shares of its common stock, for an aggregate purchase price of  $13.8 million at an average price of $22.52 per share, including of repurchases pending settlement. As of March 5, 2018, Ciena has an aggregate of $280.5 million of authorized funds remaining under its Stock Repurchase Program.

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

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains statements that discuss future events or expectations, projections of results of operations or financial condition, changes in the markets for our products and services, trends in our business, business prospects and strategies and other “forward-looking” information. In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” "projects," "targets," or “continue” or the negative of those words and other comparable words. These statements may relate to, among other things, our competitive landscape; market conditions and growth opportunities; factors impacting our industry; factors impacting the businesses of network operators and their network architectures; adoption of next-generation network technology and software programmability and control of networks; our strategy, including our research and development, supply chain and go-to-market initiatives; efforts to increase application of our solutions in customer networks and to increase the reach of our business into new or growing customer and geographic markets; our backlog and seasonality in our business; expectations for our financial results, revenue, gross margin, operating expense and key operating measures in future periods; the adequacy of our sources of liquidity to satisfy our working capital needs, capital expenditures, and other liquidity requirements; business initiatives including IT transitions or initiatives; the impact of the Tax Cuts and Jobs Act and provisional estimates with respect thereto; and market risks associated with financial instruments and foreign currency exchange rates. These statements are subject to known and unknown risks, uncertainties and other factors, and actual events or results may differ materially due to factors such as: 

• our ability to execute our business and growth strategies;

• fluctuations in our revenue, gross margin and operating results and our financial results generally;

• the loss of any of our large customers, a significant reduction in their spending, or a material change in their networking or procurement strategies;

• the competitive environment in which we operate; 

• market acceptance of products and services currently under development and delays in product or software development;

• lengthy sales cycles and onerous contract terms with communications service providers, Web-scale providers and other large customers;

• product performance or security problems and undetected errors;

• our ability to diversify our customer base beyond our traditional customers and to broaden the application for our solutions in communications networks;

• the level of growth in network traffic and bandwidth consumption and the corresponding level of investment in network infrastructures by network operators;

• the international scale of our operations and fluctuations in currency exchange rates;

• our ability to forecast accurately demand for our products for purposes of inventory purchase practices;

• the impact of pricing pressure and price erosion that we regularly encounter in our markets; 

• our ability to enforce our intellectual property rights, and costs we may incur in response to intellectual property right infringement claims made against us;

• the continued availability, on commercially reasonable terms, of software and other technology under third-party licenses;

• the potential failure to maintain the security of confidential, proprietary or otherwise sensitive business information or systems or to protect against cyber attacks;

• the performance of our third-party contract manufacturers;

• changes or disruption in components or supplies provided by third parties, including sole and limited source suppliers;

• our ability to manage effectively our relationships with third-party service partners and distributors;

• unanticipated risks and additional obligations in connection with our resale of complementary products or technology of other companies;

25

• our ability to grow and maintain our new distribution relationships under which we will make available certain technology as a component;

• our exposure to the credit risks of our customers and our ability to collect receivables;

• modification or disruption of our internal business processes and information systems;

• the effect of our outstanding indebtedness on our liquidity and business;

• fluctuations in our stock price and our ability to access the capital markets to raise capital;

• unanticipated expenses or disruptions to our operations caused by facilities transitions or restructuring activities;

• our ability to attract and retain experienced and qualified personnel;

• disruptions to our operations caused by strategic acquisitions and investments or the inability to achieve the expected benefits and synergies of newly-acquired businesses;

• our ability to grow our software business and address networking strategies including software-defined networking and network function virtualization;

• changes in, and the impact of, government regulations, including with respect to: the communications industry generally; the business of our customers; the use, import or export of products; and the environment, potential climate change, and other social initiatives;

• the impact of the Tax Cuts & Jobs Act and any adjustments to provisional estimates relating thereto;

• future legislation or executive action in the U.S. relating to tax policy or trade regulation;

• the write-down of goodwill, long-lived assets, or our deferred tax assets;

• our ability to maintain effective internal controls over financial reporting and liabilities that result from the inability to comply with corporate governance requirements; and

• adverse results in litigation matters.

These are only some of the factors that may affect the forward-looking statements contained in this quarterly report. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this quarterly report. 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 and risk factors described in our annual report onForm 10-K, which we filed with the Securities and Exchange Commission (the "SEC") on December 22, 2017. However, we operate in a very competitive and rapidly changing environment and new risks and uncertainties emerge, are identified or become apparent from time to time. We cannot predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this quarterly report. You should be aware that the forward-looking statements contained in this quarterly report are based on our current views and assumptions. We undertake no obligation to revise or update any forward-looking statements made in this quarterly report to reflect events or circumstances after the date hereof or to reflect new information or the occurrence of unanticipated events, except as required by law. The forward-looking statements in this quarterly report are intended to be subject to protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Overview

We are a network strategy and technology company, providing solutions that enable a wide range of network operators to deploy and manage next-generation communication architectures that deliver a broad array of services. We provide network hardware, software and services that support the transport, switching, aggregation, service delivery and management of video, data, and voice traffic on communications networks. Our high-capacity hardware and network management and control software solutions enable open, programmable networks that enhance automation, reduce network complexity, and support changing service requirements. Our solutions create business and operational value for our customers by enabling them to introduce new revenue-generating services and reduce network costs.

Our solutions include a diverse set of Networking Platforms products, which are used by a broad range of network operator customers and market segments, including communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education (R&E) institutions, and other emerging network operators. These products, which can be applied from the network core to network access points, allow network operators to scale capacity, increase transmission speeds, allocate traffic and adapt dynamically to changing end-user service demands. In addition to our portfolio of high-capacity hardware systems and components, we offer network management and domain control software platforms, along with advanced applications software, designed to simplify the creation, automation and delivery of services across multi-vendor and multi-domain network environments. To complement our hardware and software solutions, we offer a broad range of services that help our customers design, optimize, integrate, deploy, manage, and maintain their networks.

26

Stock Repurchase Authorization. On December 7, 2017, we announced that our Board of Directors authorized a program to repurchase up to $300 million of our outstanding common stock through the end of fiscal 2020. We may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended, or discontinued at any time. For additional information, including our repurchase activities under the program, see Note 14 and Note 18 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report and Item 2 of Part II of this report.

Impact of Tax Cuts and Jobs Act. Our results of operations for the first quarter of fiscal 2018 were impacted by enactment of the Tax Cuts and Jobs Act (the "Tax Act") on December 22, 2017. Accordingly, our results for the first quarter of fiscal 2018 include a provisional $476.9 million tax charge consisting of the following:

• $431.3 million charge related to the remeasurement of U.S. net deferred tax assets at the lower statutory rate under the Tax Act; and

• $45.6 million charge related to a transition tax on accumulated historical foreign earnings and its deemed repatriation to the U.S.

These amounts are provisional and reflect management’s current estimates and current interpretations of the Tax Act. These amounts may require adjustment in future periods as additional guidance under the Tax Act becomes available and analysis of its provisions is completed. See Note 5 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report for more information related to the impact of the Tax Act.

Available Information. Our quarterly reports on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, and any amendments thereto filed or furnished 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 or furnish 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 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.

For additional information on our business, industry, market opportunity, competitive landscape, and strategy, see our annual report on Form 10-K for the fiscal year ended October 31, 2017.

27

Consolidated Results of Operations

Operating Segments

We have the following operating segments for reporting purposes: (i) Networking Platforms; (ii) Software and Software-Related Services; and (iii) Global Services. As of the first quarter of fiscal 2018, sales of our Optical Transport products are reflected within the Converged Packet Optical product line of our Networking Platforms segment for all periods presented. See Note 16 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Quarter ended January 31, 2018 compared to the quarter ended January 31, 2017

Revenue

During the first quarter of fiscal 2018, approximately 19.0% of our revenue was non-U.S. Dollar denominated, including sales in Euros, Japanese Yen, Canadian Dollars, Brazilian Reais, Argentina Pesos, British Pounds, Mexican Pesos and Indian Rupees. During the first quarter of fiscal 2018, as compared to the first quarter of fiscal 2017, the U.S. Dollar fluctuated against these currencies. Consequently, our revenue reported in U.S. Dollars slightly increased by approximately $4.2 million, or 0.7%, as compared to the first quarter of fiscal 2017, due to fluctuations in foreign currency. The table below (in thousands, except percentage data) sets forth the changes in our operating segment revenue for the periods indicated:

	Quarter Ended January 31,						Increase
	2018		%*	2017		%*	(decrease)			%**
Revenue:
Networking Platforms
Converged Packet Optical	$	427,401	66.1	$	417,750	67.2	$	9,651		2.3
Packet Networking	68,632		10.6	72,194		11.6	(3,562		)	(4.9	)
Total Networking Platforms	496,033		76.7	489,944		78.8	6,089			1.2
Software and Software-Related Services
Software Platforms	29,576		4.6	17,049		2.7	12,527			73.5
Software-Related Services	23,911		3.7	22,331		3.6	1,580			7.1
Total Software and Software-Related Services	53,487		8.3	39,380		6.3	14,107			35.8
Global Services
Maintenance Support and Training	55,958		8.7	54,990		8.9	968			1.8
Installation and Deployment	30,016		4.7	27,919		4.5	2,097			7.5
Consulting and Network Design	10,641		1.6	9,264		1.5	1,377			14.9
Total Global Services	96,615		15.0	92,173		14.9	4,442			4.8
Consolidated revenue	$	646,135	100.0	$	621,497	100.0	$	24,638		4.0

_____________________________

*    Denotes % of total revenue

**    Denotes % change from 2017 to 2018

• Networking Platforms segment revenueincreased, primarily reflecting a product line sales increase of $9.7 million of our Converged Packet Optical products, partially offset by a product line sales decrease of $3.6 million of our Packet Networking products.

◦ Converged Packet Optical sales primarily reflect sales increases of $50.4 million of our Waveserver stackable interconnect system, primarily due to increased sales to Web-scale providers, which, as we continue to diversify, represent a growing portion of our business, and $25.2 million of our Optical Transport Network (OTN) configuration for the 5410 Reconfigurable Switching System, primarily due to increased sales to communications service providers in the Asia Pacific (“APAC”) region. These increases were partially offset

28

by sales decreases of $33.4 million of our 6500 Packet-Optical Platform, $16.4 million of our 5430 Reconfigurable Switching System and $11.9 million of our Z-Series Packet-Optical Platform. The decreases in sales of our 6500 Packet-Optical Platform are primarily due to decreased sales to certain communications service providers, government customers and certain submarine network operators.

◦ Packet Networking sales primarily reflects a sales decrease of $5.4 million of our 3000 and 5000 families of service delivery and aggregation switches, primarily due to decreased sales to AT&T, partially offset by increased sales to other communications service providers.

• Software and Software-Related Services segment revenueincreased, primarily reflecting sales increases of $12.5 million in our software platforms and $1.6 million in software-related services. The increase in software platform sales primarily reflects an increase of $13.4 million in sales of our Blue Planet software platform to AT&T and other communications service providers.

• Global Servicessegment revenue increased, primarily reflecting sales increases of $2.1 million of our installation and deployment services, $1.4 million of our network transformation services and $1.0 million of our maintenance support and training services.

Our operating segments each engage in business and operations across four geographic regions: North America; Europe, Middle East and Africa ("EMEA"); Caribbean and Latin America (“CALA”); and APAC. Results for North America include only activities in the U.S. and Canada. Part of our business and growth strategy is to continue to diversify our customer base and secure additional communications service provider customers outside of North America, including in high-growth geographies such as the APAC region. We believe that this is an important part of our strategy, and that it is required for continued revenue growth. The following table reflects our geographic distribution of revenue principally based on the relevant location for our delivery of products and performance of services. Our revenue, particularly when considered by geographic distribution, can fluctuate significantly and the timing of revenue recognition for large network projects, particularly outside of North America, can result in large variations in geographic revenue results in any particular quarter. The increase in our APAC region for the fiscal quarter ended January 31, 2018 was primarily driven by increased sales in Japan and continued execution of our strategy to capture new market share with communications service providers in the region. The table below (in thousands, except percentage data) sets forth the changes in geographic distribution of revenue for the periods indicated:

	Quarter Ended January 31,						Increase
	2018		%*	2017		%*	(decrease)			%**
North America	$	402,909	62.4	$	405,928	65.3	$	(3,019	)	(0.7	)
EMEA	97,834		15.1	91,543		14.7	6,291			6.9
CALA	34,563		5.3	35,146		5.7	(583		)	(1.7	)
APAC	110,829		17.2	88,880		14.3	21,949			24.7
Total	$	646,135	100.0	$	621,497	100.0	$	24,638		4.0

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2017 to 2018

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 associated with our provision of services including installation, deployment, maintenance support, consulting and training activities and, when applicable, estimated losses on committed customer contracts. The majority of these costs relate to personnel, including employee and third party contractor-related costs.

Our gross profit as a percentage of revenue, or “gross margin,” has remained relatively consistent in recent fiscal years. However, gross margin, particularly when viewed on a quarterly basis, can fluctuate due to a number of factors. Our gross margin remains highly dependent on our continued ability to drive product cost reductions relative to the price erosion that we

29

regularly encounter in our markets. Moreover, we are often required to compete with aggressive pricing and commercial terms and, to secure business with new and existing customers, we may agree to pricing or other unfavorable commercial terms that adversely affect our gross margin. Our success in taking share and winning new business can result in additional costs associated with the early stages of network deployments, including an increased concentration of lower margin “common” equipment sales and installation services, as compared to higher margin products including channel cards, software services, and maintenance services. Gross margin can be impacted by technology-based price compression and the introduction or substitution of new platforms for existing solutions that carry higher margins. Gross margin can also be impacted by changes in expense for excess and obsolete inventory and warranty obligations and our revenue concentration within a particular segment, product line, geography, or customer.

Service gross margin can be affected by the mix of customers and services, particularly the mix between deployment and maintenance services, geographic mix, and the timing and extent of any investments in internal resources to support this business.

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 January 31,						Increase
	2018		%*	2017		%*	(decrease)			%**
Total revenue	$	646,135	100.0	$	621,497	100.0	$	24,638		4.0
Total cost of goods sold	374,370		57.9	347,712		55.9	26,658			7.7
Gross profit	$	271,765	42.1	$	273,785	44.1	$	(2,020	)	(0.7	)

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2017 to 2018

	Quarter Ended January 31,						Increase
	2018		%*	2017		%*	(decrease)			%**
Product revenue	$	525,609	100.0	$	506,993	100.0	$	18,616		3.7
Product cost of goods sold	313,120		59.6	286,811		56.6	26,309			9.2
Product gross profit	$	212,489	40.4	$	220,182	43.4	$	(7,693	)	(3.5	)

_____________________________________

*    Denotes % of product revenue

**    Denotes % change from 2017 to 2018

	Quarter Ended January 31,						Increase
	2018		%*	2017		%*	(decrease)		%**
Service revenue	$	120,526	100.0	$	114,504	100.0	$	6,022	5.3
Service cost of goods sold	61,250		50.8	60,901		53.2	349		0.6
Service gross profit	$	59,276	49.2	$	53,603	46.8	$	5,673	10.6

_____________________________________

*    Denotes % of services revenue

**    Denotes % change from 2017 to 2018

• Gross profit as a percentage of revenue reflects reduced product gross profit, partially offset by improved services gross profit. We may encounter fluctuations or reductions in quarterly gross margin during fiscal 2018 as a result of our strategy to aggressively capture additional market share and displace competitors, particularly with communications service providers internationally. 

• Gross profit on products as a percentage of product revenue decreased primarily as a result of market-based price erosion, the impact of early stages of international network deployments, including an increased concentration of lower margin “common” equipment sales, partially offset by product cost reductions and increased software platform

30

sales. Part of our strategy for fiscal 2018 is to leverage our technology leadership and to aggressively capture additional market share and displace competitors, particularly with communications service providers internationally. Accordingly, we may encounter fluctuations or reductions in quarterly gross margin during this period.

• Gross profit on services as a percentage of services revenueincreased primarily due to improved margin on deployment sales and increased sales of higher margin software subscription services and maintenance support services.

Operating Expense

We expect operating expense to increase in fiscal 2018 from the level reported for fiscal 2017 in order to fund our research and development initiatives.

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, 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 reflects the amortization of both purchased technology and the value of customer relationships derived from our acquisitions.

• Significant asset impairments and restructuring costs primarily reflect actions we have taken to better align our workforce, facilities, and operating costs with perceived market opportunities, business strategies and changes in market and business conditions and significant impairments of assets.

During the first quarter of fiscal 2018, approximately 53.4% of our operating expense was non-U.S. Dollar denominated, including expenses in Canadian Dollars, British Pounds, Indian Rupees, Euros, and Brazilian Reais. During the first quarter of fiscal 2018 as compared to the first quarter of fiscal 2017, the U.S. Dollar fluctuated against these currencies. Consequently, our operating expense reported in U.S. Dollars slightly increased by approximately $6.2 million, or 2.4%, as compared to the first quarter of fiscal 2017, due to fluctuations in foreign currency. The table below (in thousands, except percentage data) sets forth the changes in operating expense for the periods indicated:

	Quarter Ended January 31,						Increase
	2018		%*	2017		%*	(decrease)			%**
Research and development	$	118,524	18.3	$	116,869	18.8	$	1,655		1.4
Selling and marketing	88,515		13.7	85,002		13.7	3,513			4.1
General and administrative	38,406		6.0	35,864		5.8	2,542			7.1
Amortization of intangible assets	3,623		0.6	14,551		2.3	(10,928		)	(75.1	)
Significant asset impairments and restructuring costs	5,961		0.9	2,395		0.4	3,566			148.9
Total operating expenses	$	255,029	39.5	$	254,681	41.0	$	348		0.1

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2017 to 2018

• Research and development expense was adversely affected by$3.3 million as a result of foreign exchange rates, net of hedging, primarily due to a weaker U.S. Dollar in relation to the Canadian Dollar. Including the effect of foreign exchange rates, research and development expenses increased by $1.7 million. This change primarily reflects increased employee and compensation costs and depreciation costs, partially offset by lower facility and information systems expense and professional services.

31

• Selling and marketing expense was adversely affected by$2.4 million as a result of foreign exchange rates, primarily due to a weaker U.S. Dollar in relation to the Euro. Including the effect of foreign exchange rates, selling and marketing expenses increased by $3.5 million, primarily reflecting increased employee and compensation costs.

• General and administrative expense increasedby $2.5 million, primarily reflecting increased professional services and legal fees.

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

• Significant asset impairments and restructuring costs increased reflecting a global workforce reduction of approximately 100 employees during the first quarter of fiscal 2018 as part of a business optimization strategy to improve gross margin, constrain operating expense, and redesign certain business processes. The increase also reflects unfavorable lease commitments in connection with a portion of facilities located in Petaluma, California.

Other items

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

	Quarter Ended January 31,						Increase
	2018		%*	2017		%*	(decrease)			%**
Interest and other income (loss), net	$	1,575	0.2	$	370	0.1	$	1,205		325.7
Interest expense	$	13,734	2.1	$	15,203	2.4	$	(1,469	)	(9.7	)
Provision for income taxes	$	477,940	74.0	$	410	0.1	$	477,530		n/a

_____________________________________

*    Denotes % of total revenue

**    Denotes % change from 2017 to 2018

n/a    Not meaningful

• Interest and other income (loss), net primarily reflects a $1.1 million gain in interest income.

• Interest expense decreased primarily due to a reduction in our aggregate outstanding debt due to the refinancing of our term loans during the second quarter of fiscal 2017 and the maturity of our outstanding 0.875% Convertible Senior Notes during the third quarter of fiscal 2017.

• Provision for income taxes increased primarily due to the impact of significant additional tax expense resulting from the enactment of the Tax Act and reflects $431.3 million for the remeasurement of our net deferred tax assets and a $45.6 million charge related to a transition tax on accumulated historical foreign earnings and their deemed repatriation to the U.S. For additional information, see Note 5 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Segment Profit

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

	Quarter Ended January 31,
	2018		2017		Increase (decrease)			%*
Segment profit:
Networking Platforms	$	88,569	$	113,747	$	(25,178	)	(22.1	)
Software and Software-Related Services	$	23,635	$	7,700	$	15,935		206.9
Global Services	$	41,037	$	35,469	$	5,568		15.7

_____________________________________

*    Denotes % change from 2017 to 2018

• Networking Platforms segment profitdecreased, primarily due to reduced gross margin as described above, and increased research and development costs, partially offset by higher sales volume.

32

• Software and Software-Related Services segment profitincreased, primarily due to higher sales volume, as described above, resulting in increased gross profits, and slightly lower research and development costs.

• Global Services segment profitincreased, primarily due to improved gross margin on deployment sales and increased sales of higher margin maintenance support services.

Liquidity and Capital Resources

For the three months ended January 31,2018, we generated$35.7 million in cash to fund our operating needs, as our net loss (adjusted for non-cash charges) of $56.4 million exceeded our working capital requirements of $20.7 million. Our net loss (adjusted for non-cash charges) reflects a non-cash tax provision of $476.9 million primarily related to the enactment of the Tax Act. For additional information on the non-cash tax provision, see Note 5 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report. For additional details on our cash from operations, see the discussion below entitled “Cash from Operations.”

Cash, cash equivalents and investments increased by $17.3 million during the first three months of fiscal 2018. In addition to the cash from operations mentioned above, proceeds from issuance of equity under our employee stock purchase plans provided $11.0 million in cash during the period. These provisions were sufficient to fund our investing activities for capital expenditures totaling $25.7 million, our settlement of certain foreign currency forward contracts of $1.1 million and our other financing activities, including our new stock repurchase program described below and in Note 14 and Note 18 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report, which totaled $4.1 million in the period.

	January 31, 2018		October 31, 2017		Increase (decrease)
Cash and cash equivalents	$	648,867	$	640,513	$	8,354
Short-term investments in marketable debt securities	278,743		279,133		(390		)
Long-term investments in marketable debt securities	59,151		49,783		9,368
Total cash and cash equivalents and investments in marketable debt securities	$	986,761	$	969,429	$	17,332

Principal Sources of Liquidity. Our principal sources of liquidity on hand include our cash, cash equivalents and investments, which as of January 31, 2018 totaled $986.8 million, as well as the senior secured asset-backed revolving credit facility to which we and certain of our subsidiaries are parties (the "ABL Credit Facility"). The ABL Credit Facility provides for a total commitment of $250 million with a maturity date of December 31, 2020. We principally use the ABL Credit Facility to support the issuance of letters of credit that arise in the ordinary course of our business and thereby to reduce our use of cash required to collateralize these instruments. As of January 31, 2018, letters of credit totaling $70.0 million were collateralized by our ABL Credit Facility. There were no borrowings outstanding under the ABL Credit Facility as of January 31, 2018.

Foreign Liquidity. The amount of cash, cash equivalents, and short-term investments held by our foreign subsidiaries was $60.7 million as of January 31, 2018. Our accumulated historical foreign earnings are generally held in either cash or short-term intercompany receivables, or have been used to fund investments in equipment, building, furniture and fixtures, or other assets and liabilities of our foreign operations. We currently intend to reinvest indefinitely our foreign earnings, however, we intend to study further the changes resulting from the enactment of the Tax Act, the costs of repatriation of such foreign earnings, and the current and future cash needs of our foreign operations to determine whether there is an opportunity to repatriate these earnings in the future on a tax-efficient basis. If we determine to repatriate these accumulated historical foreign earnings, the provisional amount of unrecognized deferred income tax liability related to foreign withholding taxes would be approximately $22.0 million. See Note 5 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Intent to Cash Settle New 2018 Convertible Notes. As more fully described in Note 12 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report, following the settlement of an exchange offer on August 2, 2017, approximately $288.7 million in aggregate principal amount at maturity of Original Notes were exchanged for New Notes, which provide us with the option, at our election, to settle conversions for cash, shares of our common stock, or a combination of cash and shares. It is our current intent that upon any conversion of the New Notes we will settle the principal amount thereof in cash.

Stock Repurchase Authorization. On December 7, 2017, we announced that our Board of Directors authorized a program to repurchase up to $300 million of our outstanding common stock through the end of fiscal 2020. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended, or discontinued at any time. As of March 5, 2018, an aggregate

33

of $280.5 million of authorized funds remained under this repurchase program. For additional information, including our repurchase activities under the program, see Note 14 and Note 18 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report and Item 2 of Part II of this report.

Liquidity Position. We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans and may consider capital raising and other market opportunities that may be available to us. We regularly evaluate alternatives to manage our capital structure and reduce our debt and may continue to opportunistically repurchase our outstanding convertible notes.

Based on past performance and current expectations, we believe that cash from operations, cash, cash equivalents, investments, and other sources of liquidity, including our ABL Credit Facility, will satisfy our working capital needs, capital expenditures, and other liquidity requirements associated with our operations, including the settlement of the principal amount of the New Notes in cash upon any conversions prior to maturity, through at least the next 12 months.

Cash from Operations

The following sections set forth the components of our $35.7 million of cash generated from operating activities during the first three months of fiscal 2018:

Net loss (adjusted for non-cash charges)

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

	Three months ended
	January 31, 2018
Net loss	$	(473,363	)
Adjustments for non-cash charges:
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	20,833
Share-based compensation costs	12,393
Amortization of intangible assets	5,912
Deferred tax provision	476,897
Provision for inventory excess and obsolescence	6,804
Provision for warranty	4,657
Other	2,269
Net loss (adjusted for non-cash charges)	$	56,402

Working Capital        

We used $20.7 million of cash for working capital during the period. The following tables set forth the major components of the cash used in working capital (in thousands):

	Three months ended
	January 31, 2018
Cash provided by accounts receivable	$	72,439
Cash provided by inventories	5,199
Cash provided by prepaid expenses and other	16,120
Cash used in accounts payable, accruals and other obligations	(111,476		)
Cash used in deferred revenue	(2,981		)
Total cash used for working capital	$	(20,699	)

As compared to the end of fiscal 2017:

• The $72.4 million of cash provided by accounts receivable during the first three months of fiscal 2018 reflects increased customer collections;

• The $5.2 million of cash provided by inventory during the first three months of fiscal 2018 primarily reflects improved manufacturing efficiencies to meet customer delivery schedules, partially offset by higher deferred costs of sales awaiting customer acceptance;

34

• The $16.1 million of cash provided by prepaid expense and other during the first three months of fiscal 2018 primarily reflects lower prepaid value added taxes;

• The $111.5 million of cash used in accounts payable, accruals and other obligations during the first three months of fiscal 2018 primarily reflects the timing of bonus payments to employees under our annual cash incentive compensation plan and payments to suppliers; and

• The $3.0 million of cash used in deferred revenue during the first three months of fiscal 2018 represents a decrease in advanced payments received from customers prior to revenue recognition.

Our days sales outstanding (DSOs) for the first three months of fiscal 2018 were 77 days, and our inventory turns for the first three months of fiscal 2018 were 4.9.

Cash Paid for Interest

The following tables set forth the cash paid for interest during the period (in thousands):

	Three months ended
	January 31, 2018
3.75% Convertible Senior Notes due October 15, 2018 (Original)(1)	$	—
3.75% Convertible Senior Notes due October 15, 2018 (New)(1)	—
4.0% Convertible Senior Notes due December 15, 2020(2)	3,750
Term Loan due January 30, 2022 (3)	3,986
Interest rate swaps(4)	419
ABL Credit Facility(5)	404
Capital leases	1,461
Cash paid during period	$	10,020

(1) Interest on our outstanding 3.75% Convertible Senior Notes due October 15, 2018 (Original) and our outstanding 3.75% Convertible Senior Notes due October 15, 2018 (New) is payable on April 15 and October 15 of each year.

(2) Interest on our outstanding 4.0% Convertible Senior Notes due December 15, 2020 is payable on June 15 and December 15 of each year.

(3) Interest on the Term Loan due January 30, 2022 (the "2022 Term Loan") is payable periodically based on the underlying market index rate selected for borrowing. The 2022 Term Loan bears interest at LIBOR plus a spread of 2.5% subject to a minimum LIBOR rate of 0.75%. As of the end of the first quarter of fiscal 2018, the interest rate on the 2022 Term Loan was 4.06%.

(4) Our interest rate swaps fix 98%, 82% and 77% of the principal value of the 2022 Term Loan from February 2017 through July 2018, July 2018 through June 2020 and June 2020 through January 2021, respectively. The fixed rate on the amounts hedged during the periods described above will be 4.25%, 4.25% and 4.75%, respectively.

(5) During the first three months of fiscal 2018, we utilized the ABL Credit Facility to collateralize certain standby letters of credit and paid $0.4 million in commitment fees, interest expense and other administrative charges relating to our ABL Credit Facility.

Contractual Obligations

There have been no material changes to our contractual obligations since October 31, 2017. For a summary of our contractual obligations, see Item 7 of Part II of our annual report on Form 10-K for the fiscal year ended October 31, 2017.

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

35

estimates, including those related to share-based compensation, bad debts, inventories, intangible and other long-lived assets, goodwill, 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. To the extent that there are material differences between our estimates and actual results, our consolidated financial statements will be affected.

Our critical accounting policies and estimates have not changed materially since October 31, 2017, except for items listed below. For a discussion of our critical accounting policies and estimates, see Item 7 of Part II of our annual report on Form 10-K for the fiscal year ended October 31, 2017 (Management's Discussion and Analysis of Financial Condition and Results of Operations).

Deferred Tax Assets

Pursuant to Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, we maintain a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (including the reversals of deferred tax liabilities) during the periods in which those deferred tax assets will become deductible. In evaluating whether a valuation allowance is required under such rules, we consider all available positive and negative evidence, including prior operating results, the nature and reason for any losses, our forecast of future taxable income, utilization of tax planning strategies, and the dates on which any deferred tax assets are expected to expire. These assumptions and estimates require a significant amount of judgment and are made based on current and projected circumstances and conditions.

The valuation allowance balance at January 31, 2018 was $151.1 million and the corresponding net deferred tax asset was $739.4 million. We will continue to evaluate future financial performance to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support reversal of all or a portion of the remaining valuation allowance. The value of our net deferred tax asset may be subject to change in the future, depending upon our generation or projections of future taxable income, as well as changes in tax policy or our tax planning strategy. For example, the recently enacted Tax Act required us to write down our net deferred tax asset by approximately $431.3 million. As this is a provisional estimate, it may be subject to change based upon availability of additional guidance and our continued assessment of the impact of the Tax Act on our business. As these amounts are finalized throughout fiscal 2018, our operating results may be materially adversely affected by a non-cash charge to reflect the change in value of these assets. For further discussion, see Note 5 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Effects of Recent Accounting Pronouncements

See Note 2 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report for information relating to our discussion of the effects of recent accounting pronouncements.

36

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk has not changed materially since October 31, 2017. For a discussion of quantitative and qualitative disclosures about market risk, see Item 7A of Part II of our annual report on Form 10-K for the fiscal year ended October 31, 2017 (Quantitative and Qualitative Disclosures About Market Risk).

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 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

The information set forth in Note 17, Commitments and Contingencies, to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report, is incorporated herein by reference.

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the following risk factors in addition to the other information contained both in this report and in our annual report on Form 10-K for the fiscal year ended October 31, 2017, including the risk factors identified in Item 1A of Part I thereof (Risk Factors). This report contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” in "Management's Discussion and Analysis" above. Our actual results could differ materially from those contained in the forward-looking statements. Any of the risks discussed below, elsewhere in this report, or in our annual report on Form 10-K for the fiscal year ended October 31, 2017, and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition or results of operations.

The final impacts of the Tax Cuts and Jobs Act could be materially different from our current estimates.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act introduced significant changes to U.S. federal corporate tax law. We continue to assess and analyze the impact of the Tax Act on our business and our company. Accordingly, some of the income tax effects reflected in our unaudited Condensed Consolidated Financial Statements are provisional amounts and are subject to adjustment in the future. The estimated impact of the new law is based on management’s current knowledge and assumptions, and the impacts we ultimately recognize could be materially different from current estimates based upon our further analysis of the Tax Act. In addition, the Tax Act remains subject to further guidance and interpretations from the U.S. federal and state governments and regulatory organizations, such as the Department of the Treasury and the Internal Revenue Service, which could also change the provisional tax liability or the accounting treatment of the provisional tax liability. As such, the full impact of the Tax Act in fiscal 2018 or in future periods cannot be predicted at this time, and there can be no assurance that the impact of the Tax Act will not adversely affect our results of operations.

We may be required to write down the value of certain deferred tax assets, which would adversely affect our operating results.

We have a number of significant assets on our balance sheet as of January 31, 2018 and the value of these assets can be adversely impacted by factors related to our business and operating performance, as well as factors outside of our control. As of January 31, 2018, our balance sheet includes a $739.4 million net deferred tax asset. The value of our net deferred tax assets can be significantly impacted by changes in tax policy or our tax planning strategy. For example, the recently enacted Tax Act

37

required us to write down our net deferred tax asset by approximately $431.3 million. As this is a provisional estimate, it may be subject to change based upon our continued assessment of the Tax Act on our business. If any additional write downs are required, our operating results may be materially adversely affected.

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

Issuer Purchases of Equity Securities

The following table provides a summary of repurchases of our common stock during the first quarter of fiscal 2018:

Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in Thousands)
November 1, 2017 to November 30, 2017	—	$	—	—	$	300,000
December 1, 2017 to December 31, 2017	—	$	—	—	$	300,000
January 1, 2018 to January 31, 2018	262,487	$	21.92	262,487	$	294,245
Total	262,487	$	21.92	262,487

(1) On December 7, 2017, we announced that our Board of Directors authorized a program to repurchase up to $300 million of our common stock through the end of fiscal 2020. Shares reported in this table were repurchased under this program. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended, or discontinued at any time.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

38

Item 6. Exhibits

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

39

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:	March 7, 2018	By:	/s/ Gary B. Smith
			Gary B. Smith
			President, Chief Executive Officer and Director (Duly Authorized Officer)
Date:	March 7, 2018	By:	/s/ James E. Moylan, Jr.
			James E. Moylan, Jr.
			Senior Vice President, Finance and Chief Financial Officer (Principal Financial Officer)

40

EX-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.

Dated: March 7, 2018

/s/ Gary B. Smith  

Gary B. Smith 

President and Chief Executive Officer 

EX-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: March 7, 2018

/s/ James E. Moylan, Jr.

James E. Moylan, Jr.

Senior Vice President and Chief Financial Officer

EX-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 January 31, 2018 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

March 7, 2018

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

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 January 31, 2018 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.

James E. Moylan, Jr.

Senior Vice President and Chief Financial Officer

March 7, 2018

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

Document and Entity Information - shares	3 Months Ended
	Jan. 31, 2018	Mar. 05, 2018
Document and Entity Information [Abstract]
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	Jan. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		143,586,925

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Revenue:
Products	$ 525,609	$ 506,993
Services	120,526	114,504
Total revenue	646,135	621,497
Cost of goods sold:
Products	313,120	286,811
Services	61,250	60,901
Total cost of goods sold	374,370	347,712
Gross profit	271,765	273,785
Operating expenses:
Research and development	118,524	116,869
Selling and marketing	88,515	85,002
General and administrative	38,406	35,864
Amortization of intangible assets	3,623	14,551
Significant asset impairments and restructuring costs	5,961	2,395
Total operating expenses	255,029	254,681
Income from operations	16,736	19,104
Interest and other income (loss), net	1,575	370
Interest expense	(13,734)	(15,203)
Income before income taxes	4,577	4,271
Provision for income taxes	477,940	410
Net income (loss)	$ (473,363)	$ 3,861
Basic net income (loss) per common share	$ (3.29)	$ 0.03
Diluted net income (loss) per potential common share	$ (3.29)	$ 0.03
Weighted average basic common shares outstanding	143,922	140,682
Weighted average dilutive potential common shares outstanding	143,922	142,184

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Net income (loss)	$ (473,363)	$ 3,861
Other Comprehensive Income (Loss), Net of Tax [Abstract]
Change in unrealized loss on available-for-sale securities, net of tax	(261)	(249)
Change in cumulative translation adjustments	8,202	490
Other comprehensive income	13,392	6,158
Total comprehensive income (loss)	(459,971)	10,019
Change in unrealized gain on foreign currency forward contracts, net of tax
Other Comprehensive Income (Loss), Net of Tax [Abstract]
Change in unrealized gain on foreign currency forward contracts and forward starting interest rate swaps, net of tax	1,553	1,425
Change in unrealized gain on forward starting interest rate swap, net of tax
Other Comprehensive Income (Loss), Net of Tax [Abstract]
Change in unrealized gain on foreign currency forward contracts and forward starting interest rate swaps, net of tax	$ 3,898	$ 4,492

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Current assets:
Cash and cash equivalents	$ 648,867	$ 640,513
Short-term investments	278,743	279,133
Accounts receivable, net of allowance for doubtful accounts of $17.6 million as of January 31, 2018 and October 31, 2017, respectively.	553,724	622,183
Inventories	255,251	267,143
Prepaid expenses and other	186,837	197,339
Total current assets	1,923,422	2,006,311
Long-term investments	59,151	49,783
Equipment, building, furniture and fixtures, net	318,835	308,465
Goodwill	267,899	267,458
Other intangible assets, net	96,485	100,997
Deferred tax asset, net	739,446	1,155,104
Other long-term assets	64,146	63,593
Total assets	3,469,384	3,951,711
Current liabilities:
Accounts payable	209,243	260,098
Accrued liabilities and other short-term obligations	268,164	322,934
Deferred revenue	103,216	102,418
Current portion of long-term debt	352,753	352,293
Total current liabilities	933,376	1,037,743
Long-term deferred revenue	79,297	82,589
Other long-term obligations	115,970	111,349
Long-term debt, net	584,601	583,688
Total liabilities	1,713,244	1,815,369
Commitments and contingencies (Note 17)
Stockholders’ equity:
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; 144,180,782 and 143,043,227 shares issued and outstanding	1,442	1,430
Additional paid-in capital	6,828,648	6,810,182
Accumulated other comprehensive income (loss)	2,375	(11,017)
Accumulated deficit	(5,076,325)	(4,664,253)
Total stockholders’ equity	1,756,140	2,136,342
Total liabilities and stockholders’ equity	$ 3,469,384	$ 3,951,711

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Jan. 31, 2018	Oct. 31, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 17.6	$ 17.6
Stockholders’ equity:
Preferred stock par value per share	$ 0.01	$ 0.01
Preferred stock shares authorized	20,000,000	20,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value per share	$ 0.01	$ 0.01
Common stock shares authorized	290,000,000	290,000,000
Common stock shares issued	144,180,782	143,043,227
Common stock shares outstanding	144,180,782	143,043,227

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Cash flows provided by (used in) operating activities:
Net income (loss)	$ (473,363)	$ 3,861
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	20,833	16,699
Share-based compensation costs	12,393	12,825
Amortization of intangible assets	5,912	18,864
Deferred tax provision	476,897	0
Provision for inventory excess and obsolescence	6,804	5,431
Provision for warranty	4,657	553
Other	2,269	4,452
Changes in assets and liabilities:
Accounts receivable	72,439	(21,956)
Inventories	5,199	(78,749)
Prepaid expenses and other	16,120	(1,004)
Accounts payable, accruals and other obligations	(111,476)	4,037
Deferred revenue	(2,981)	8,737
Net cash provided by (used in) operating activities	35,703	(26,250)
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property	(25,662)	(25,706)
Purchase of available for sale securities	(118,877)	(89,897)
Proceeds from maturities of available for sale securities	110,000	95,000
Settlement of foreign currency forward contracts, net	1,061	440
Net cash used in investing activities	(33,478)	(20,163)
Cash flows provided by (used in) financing activities:
Payment of long-term debt	(1,000)	(46,296)
Payment of capital lease obligations	(914)	(605)
Repurchases of common stock-repurchase program	(4,103)	0
Proceeds from issuance of common stock	11,008	9,708
Net cash provided by (used in) financing activities	4,991	(37,193)
Effect of exchange rate changes on cash and cash equivalents	1,138	(156)
Net increase (decrease) in cash and cash equivalents	8,354	(83,762)
Cash and cash equivalents at beginning of period	640,513	777,615
Cash and cash equivalents at end of period	648,867	693,853
Supplemental disclosure of cash flow information
Cash paid during the period for interest	10,020	11,831
Cash paid during the period for income taxes, net	3,498	5,521
Non-cash investing activities
Purchase of equipment in accounts payable	2,014	5,293
Non-cash financing activities
Repurchase of common stock in accrued liabilities from repurchase program	$ 1,652	$ 0

XML

Condensed Consolidated Statement of Changes in Stockholders’ Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in-Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) at Oct. 31, 2016		139,767,627
Beginning balance at Oct. 31, 2016	$ 766,341	$ 1,398	$ 6,715,478	$ (24,329)	$ (5,926,206)
Net income (loss)	3,861				3,861
Other comprehensive income	6,158			6,158
Issuance of shares from employee equity plans (in shares)		1,494,979
Issuance of shares from employee equity plans	9,708	$ 15	9,693
Share-based compensation expense	12,825		12,825
Ending balance (in shares) at Jan. 31, 2017		141,262,606
Ending balance at Jan. 31, 2017	798,893	$ 1,413	6,737,996	(18,171)	(5,922,345)
Effect of adoption of new accounting standards	$ 62,123		832		61,291
Beginning balance (in shares) at Oct. 31, 2017	143,043,227	143,043,227
Beginning balance at Oct. 31, 2017	$ 2,136,342	$ 1,430	6,810,182	(11,017)	(4,664,253)
Net income (loss)	(473,363)				(473,363)
Other comprehensive income	$ 13,392			13,392
Repurchase of common stock (in shares)	(262,487)	(262,487)
Repurchase of common stock	$ (5,755)	$ (3)	(5,752)
Issuance of shares from employee equity plans (in shares)		1,400,042
Issuance of shares from employee equity plans	11,008	$ 15	10,993
Share-based compensation expense	$ 12,393		12,393
Ending balance (in shares) at Jan. 31, 2018	144,180,782	144,180,782
Ending balance at Jan. 31, 2018	$ 1,756,140	$ 1,442	$ 6,828,648	$ 2,375	$ (5,076,325)

XML

Interim Financial Statements

3 Months Ended

Jan. 31, 2018

Quarterly Financial Data [Abstract]

Interim Financial Statements

INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein for Ciena Corporation and its wholly owned subsidiaries (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "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 accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of October 31, 2017 was derived from audited financial statements, but does not include all disclosures required by GAAP. 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, 2017.

Ciena has a 52 or 53-week fiscal year, with quarters ending on the Saturday nearest to the last day of January, April, July and October, respectively, of each year. Fiscal 2018 is a 53-week fiscal year with the additional week occurring in the fourth quarter. Fiscal 2017 was a 52-week fiscal year. 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.

XML

Recent Accounting Pronouncements

3 Months Ended

Jan. 31, 2018

Accounting Policies [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

Except for the changes in certain policies related to adoption of the accounting standards described below, there have been no material changes to Ciena's significant accounting policies, compared to the accounting policies described in Note 1, Ciena Corporation and Significant Accounting Policies and Estimates, in Notes to Consolidated Financial Statements in Item 8 of Part II of Ciena's annual report on Form 10-K for the fiscal year ended October 31, 2017.

Newly Issued Accounting Standards - Effective

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01 ("ASU 2017-01"), Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition or disposal of assets or businesses. The amendments in this update provide a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. Ciena will evaluate the effect of the update at the time of any future acquisition or disposal. Ciena adopted ASU 2017-01 during the first quarter of fiscal 2018.

In August 2017, the FASB issued ASU No. 2017-12 ("ASU 2017-12"), Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships, through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. Ciena adopted ASU 2017-12 during the first quarter of fiscal 2018. For hedges for which Ciena has elected to exclude the spot-forward difference from assessment of effectiveness, Ciena has elected to amortize the difference on a straight-line basis. Ciena will record amortization in earnings each period with an offsetting entry to other comprehensive income, and all changes in fair value over the term of the derivative in other comprehensive income. The application of this accounting standard did not have a material impact on Ciena's Condensed Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-09 ("ASU 2016-09"), Improvements to Employee Share-Based Payment Accounting, which provides guidance on several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. ASU 2016-09 is effective for Ciena beginning in the first quarter of fiscal 2018. In connection with the adoption of this guidance, Ciena recognized approximately $62.1 million of deferred tax assets related to previously unrecognized tax benefits. This was recorded as a cumulative-effect adjustment to retained earnings as of the beginning of the first quarter of fiscal 2018. Additionally, the consolidated statements of cash flows will include excess tax benefits as an operating activity, on a prospective basis as a result of the adoption. Finally, Ciena has elected to recognize forfeitures when they occur, rather than to estimate the impact of forfeitures when the award is granted. Accordingly, Ciena recognized approximately $0.8 million for this change through a cumulative effect adjustment recorded to opening retained earnings in the first quarter of fiscal 2018.

Newly Issued Accounting Standards - Not Yet Effective

In May 2014, the FASB issued ASU No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition. ASU 2014-09 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. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. 

For multiple element software arrangements where vendor-specific objective evidence ("VSOE") of undelivered maintenance does not exist, Ciena currently recognizes revenue for the entire arrangement over the maintenance term. Ciena expects that the adoption of ASU 2014-09 will require that it determine the stand alone selling price for each of the software and software-related deliverables at contract inception, and Ciena consequently expects certain software deliverables will be recognized at a point in time rather than over a period of time.

Ciena also expects certain installation and deployment, and consulting and network design services, will be recognized over a period of time rather than at a point in time.

Ciena has considered the impact of the guidance in Accounting Standards Codification ("ASC") 340-40, Other Assets and Deferred Costs; Contracts with Customers, and the interpretations of the FASB Transition Resource Group for Revenue Recognition (TRG) with respect to capitalization and amortization of incremental costs of obtaining a contract. In conjunction with this interpretation, Ciena has elected to implement the practical expedient clause allowing for incremental costs to be recognized as an expense when incurred if the period of the asset recognition is one year or less, and amortized over the period of performance, if the period of the asset recognition is greater than one year.   

Ciena expects to implement this standard using the modified retrospective approach whereby the cumulative effect at adoption will be presented as an adjustment to the opening balance of retained earnings. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for those periods. ASU 2014-09 will be effective for Ciena beginning in the first quarter of fiscal 2019. Ciena is continuing to evaluate other possible impacts of the adoption of this ASU on its Consolidated Financial Statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"), Leases, which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and to provide additional disclosures. ASU 2016-02 is effective for Ciena beginning in the first quarter of fiscal 2020. Under current GAAP, the majority of Ciena’s leases for its properties are considered operating leases, and Ciena expects that the adoption of this ASU will require these leases to be classified as financing leases and to be recognized as assets and liabilities on Ciena’s balance sheet. Ciena is continuing to evaluate other possible impacts of the adoption of ASU 2016-02 on its Consolidated Financial Statements and disclosures.

XML

Restructuring Costs

3 Months Ended

Jan. 31, 2018

Restructuring and Related Activities [Abstract]

Restructuring Costs

RESTRUCTURING COSTS

Ciena has undertaken a number of restructuring activities intended to reduce expense and to 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 three months ended January 31, 2018 (in thousands):

	Workforce reduction				Consolidation of excess facilities				Total
Balance at October 31, 2017	$	1,291			$	1,648			$	2,939
Additional liability recorded	4,413			(1)	1,548			(2)	5,961
Cash payments	(4,459		)		(1,282		)		(5,741		)
Balance at January 31, 2018	$	1,245			$	1,914			$	3,159
Current restructuring liabilities	$	1,245			$	590			$	1,835
Non-current restructuring liabilities	$	—			$	1,324			$	1,324

(1) Reflects a global workforce reduction of approximately 100 employees during the first quarter of fiscal 2018 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

(2) Reflects unfavorable lease commitments in connection with a portion of facilities located in Petaluma, California.

The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the three months ended January 31, 2017 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2016	$	868		$	1,970		$	2,838
Additional liability recorded	2,008			387			2,395
Cash payments	(2,512		)	(652		)	(3,164		)
Balance at January 31, 2017	$	364		$	1,705		$	2,069
Current restructuring liabilities	$	364		$	1,269		$	1,633
Non-current restructuring liabilities	$	—		$	436		$	436

XML

Interest and Other Income (Loss), Net

3 Months Ended

Jan. 31, 2018

Other Income and Expenses [Abstract]

Interest and Other Income (Loss), Net

INTEREST AND OTHER INCOME (LOSS), NET

The components of interest and other income (loss), net, are as follows (in thousands):

	Quarter Ended January 31,
	2018			2017
Interest income	$	2,444		$	1,282
Gains (losses) on non-hedge designated foreign currency forward contracts	(699		)	1,024
Foreign currency exchange gain (loss)	13			(2,417		)
Other	(183		)	481
Interest and other income (loss), net	$	1,575		$	370

Ciena Corporation, as the U.S. parent entity, uses the U.S. Dollar as its functional currency; however, some of its foreign branch offices and subsidiaries use local currencies as their functional currencies. During the first three months of fiscal 2017, Ciena recorded $2.4 million in foreign currency exchange rate losses as a result of monetary assets and liabilities that were transacted in a currency other than the entity's functional currency, and the remeasurement adjustments were recorded in interest and other income (loss), net on the Condensed Consolidated Statements of Operations. From time to time, Ciena uses foreign currency forwards to hedge these 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 Statements of Operations. During the first three months of fiscal 2018, Ciena recorded losses of $0.7 million from non-hedge designated foreign currency forward contracts. During the first three months of fiscal 2017, Ciena recorded gains of $1.0 million from non-hedge designated foreign currency forward contracts.

XML

Income Taxes

3 Months Ended

Jan. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted. The Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate income tax rate (“federal tax rate”) from 35% to 21% effective January 1, 2018, implementing a modified territorial tax system, and imposing a mandatory one-time transition tax on accumulated earnings of foreign subsidiaries that were previously tax deferred. As a fiscal-year taxpayer, certain provisions of the Tax Act impact Ciena in fiscal 2018, including the change in the federal tax rate and the one-time transition tax, while other provisions will be effective at the beginning of fiscal 2019, including the implementation of a modified territorial tax system, other changes to how foreign earnings are subject to U.S. tax, and adoption of an alternative tax system.

As a result of the decrease in the federal tax rate from 35% to 21% effective January 1, 2018, Ciena has computed its income tax expense for the October 31, 2018 fiscal year using a blended federal tax rate of 23.4%. The 21% federal tax rate will apply to Ciena’s fiscal year ending October 31, 2019 and each year thereafter. Ciena remeasured its deferred tax assets and liabilities ("DTA") using the federal tax rate that will apply when the related temporary differences are expected to reverse.

During the three months ended January 31, 2018, Ciena recorded a provisional tax expense of $477.9 million, primarily related to the Tax Act and comprised of $431.3 million remeasurement of net DTA and $45.6 million of U.S. transition tax.

In December 2017, the SEC issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes due to the Tax Act. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. The final impact of the Tax Act may differ from the above provisional amounts due to changes in interpretations of the Tax Act, legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes and related interpretations in response to the Tax Act, and any updates or changes to estimates used in the provisional amounts. Ciena has determined that the $45.6 million of tax expense for the U.S. transition tax on accumulated earnings of foreign subsidiaries and the $431.3 million of tax expense for DTA remeasurement were each provisional amounts and reasonable estimates as of January 31, 2018. Estimates used in the provisional amounts include the anticipated reversal pattern of the gross DTAs plus the earnings and profits, cash position at the end of fiscal year 2018, foreign taxes and withholding taxes attributable to foreign subsidiaries.

Ciena currently intends to reinvest indefinitely its foreign earnings outside the U.S. However, Ciena intends to further study changes enacted by the Tax Act, costs of repatriation and the current and future cash needs of foreign operations to determine whether there is an opportunity to repatriate these earnings in the future on a tax-efficient basis. If Ciena determines to repatriate these earnings, the provisional amount of unrecognized deferred income tax liability related to these foreign withholding taxes would be approximately $22.0 million. There are no other significant temporary differences for which a deferred tax liability has not been recognized.

The significant components of DTA are as follows (in thousands):

	January 31,			October 31,
	2018			2017
Deferred tax assets:
Reserves and accrued liabilities	$	36,706		$	56,597
Depreciation and amortization	274,974			451,385
NOL and credit carry forward	560,603			803,622
Other	18,224			29,398
Gross deferred tax assets	890,507			1,341,002
Valuation allowance	(151,061		)	(185,898		)
Deferred tax asset, net of valuation allowance	$	739,446		$	1,155,104

In connection with the adoption of ASU 2016-09, Ciena recognized approximately $62.1 million of deferred tax assets related to previously unrecognized tax benefits. This was recorded as a cumulative-effect adjustment to retained earnings as of the beginning of the first quarter of fiscal 2018. See Note 2 above and Note 14 below. As of January 31, 2018, Ciena continues to maintain a valuation allowance of $151.1 million. This valuation allowance is primarily related to state and foreign net operating losses and credits that Ciena estimates it will not be able to use.

XML

Short-Term and Long-Term Investments

3 Months Ended

Jan. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Short-Term and Long-Term Investments

SHORT-TERM AND LONG-TERM INVESTMENTS

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

	January 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	239,404	$	—	(530		)	$	238,874
Included in long-term investments	59,313		—		(162		)	59,151
	$	298,717	$	—	$	(692	)	$	298,025
Commercial paper:
Included in short-term investments	$	39,868	1		—			$	39,869
	$	39,868	$	1	$	—		$	39,869

	October 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	249,498	$	—	$	(305	)	$	249,193
Included in long-term investments	49,910		—		(127		)	49,783
	$	299,408	$	—	$	(432	)	$	298,976
Commercial paper:
Included in short-term investments	$	29,939	1		—			$	29,940
	$	29,939	$	1	$	—		$	29,940

The following table summarizes the final legal maturities of debt investments at January 31, 2018 (in thousands):

	Amortized Cost		Estimated Fair Value
Less than one year	$	279,272	$	278,743
Due in 1-2 years	59,313		59,151
	$	338,585	$	337,894

XML

Fair Value Measurements

3 Months Ended

Jan. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

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

	January 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	521,698	$	—	$	—	$	521,698
U.S. government obligations	—		298,025		—		298,025
Commercial paper	—		69,810		—		69,810
Foreign currency forward contracts	—		3,730		—		3,730
Forward starting interest rate swaps	—		4,117		—		4,117
Total assets measured at fair value	$	521,698	$	375,682	$	—	$	897,380
Liabilities:
Foreign currency forward contracts	$	—	$	2,415	$	—	$	2,415
Total liabilities measured at fair value	$	—	$	2,415	$	—	$	2,415

	October 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	511,355	$	—	$	—	$	511,355
U.S. government obligations	—		298,976		—		298,976
Commercial paper	—		89,865		—		89,865
Foreign currency forward contracts	—		227		—		227
Forward starting interest rate swaps	—		218		—		218
Total assets measured at fair value	$	511,355	$	389,286	$	—	$	900,641
Liabilities:
Foreign currency forward contracts	$	—	$	2,129	$	—	$	2,129
Total liabilities measured at fair value	$	—	$	2,129	$	—	$	2,129

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

	January 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	521,698	$	29,941	$	—	$	551,639
Short-term investments	—		278,743		—		278,743
Prepaid expenses and other	—		3,730		—		3,730
Long-term investments	—		59,151		—		59,151
Other long-term assets	—		4,117		—		4,117
Total assets measured at fair value	$	521,698	$	375,682	$	—	$	897,380
Liabilities:
Accrued liabilities	$	—	$	2,415	$	—	$	2,415
Total liabilities measured at fair value	$	—	$	2,415	$	—	$	2,415

	October 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	511,355	$	59,925	$	—	$	571,280
Short-term investments	—		279,133		—		279,133
Prepaid expenses and other	—		227		—		227
Long-term investments	—		49,783		—		49,783
Other long-term assets	—		218		—		218
Total assets measured at fair value	$	511,355	$	389,286	$	—	$	900,641
Liabilities:
Accrued liabilities	$	—	$	2,129	$	—	$	2,129
Total liabilities measured at fair value	$	—	$	2,129	$	—	$	2,129

Ciena did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

XML

Inventories

3 Months Ended

Jan. 31, 2018

Inventory Disclosure [Abstract]

Inventories

INVENTORIES

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

	January 31, 2018			October 31, 2017
Raw materials	$	47,710		$	52,898
Work-in-process	16,444			18,623
Finished goods	176,426			185,488
Deferred cost of goods sold	64,445			61,340
	305,025			318,349
Provision for excess and obsolescence	(49,774		)	(51,206		)
	$	255,251		$	267,143

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 three months of fiscal 2018, Ciena recorded a provision for excess and obsolescence of $6.8 million, primarily related to a decrease in the forecasted demand for certain Networking Platforms products. Deductions from the provision for excess and obsolete inventory relate primarily to disposal activities.

XML

Accrued Liabilities and Other Short-Term Obligations

3 Months Ended

Jan. 31, 2018

Balance Sheet Related Disclosures [Abstract]

Accrued Liabilities and Other Short-Term Obligations

ACCRUED LIABILITIES AND OTHER SHORT-TERM OBLIGATIONS

As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands):

	January 31, 2018		October 31, 2017
Compensation, payroll related tax and benefits(1)	$	68,526	$	113,272
Warranty	42,526		42,456
Vacation	39,628		39,778
Capital lease obligations	3,934		3,772
Interest payable	4,867		3,612
Other	108,683		120,044
	$	268,164	$	322,934

(1) Reduction is primarily due to the timing of bonus payments to employees under Ciena's annual cash incentive compensation plan.

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

Three Months Ended January 31,	Beginning Balance		Current Period Provisions (1)	Settlements		Ending Balance
2017	$	52,324	553	(4,225	)	$	48,652
2018	$	42,456	4,657	(4,587	)	$	42,526

(1) As a result of lower than expected actual failure rates, Ciena adjusted its fiscal 2017 provision for warranty. These adjustments for previous years provisions had the effect of reducing warranty provision by $3.6 million for the three months ended January 31, 2017.

XML

Derivative Instruments

3 Months Ended

Jan. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

Foreign Currency Derivatives   

As of January 31, 2018 and October 31, 2017, Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce the variability in its Canadian Dollar and Indian Rupee denominated expense, which principally relates to research and development activities, and its Euro denominated revenue. The notional amount of these contracts was approximately $187.3 million and $86.1 million as of January 31, 2018 and October 31, 2017, respectively. These foreign exchange contracts have maturities of 12 months or less and have been designated as cash flow hedges.

During the first three months of fiscal 2018 and fiscal 2017, in order to hedge certain balance sheet exposures, Ciena entered into forward contracts to mitigate risk due to volatility in the Brazilian Real, Canadian Dollar and Mexican Peso. The notional amount of these contracts was approximately $82.7 million and $83.4 million as of January 31, 2018 and October 31, 2017, respectively. These foreign exchange contracts have maturities of 12 months or less and have not been designated as hedges for accounting purposes.

Interest Rate Derivatives

Ciena is exposed to floating rates of LIBOR interest on its term loan borrowings (see Note 12 below) and has hedged such risk by entering into floating to fixed interest rate swap arrangements ("interest rate swaps"). The interest rate swaps fix 98%, 82%, and 77% of the principal value of the 2022 Term Loan from February 2017 through July 2018, July 2018 through June 2020, and June 2020 through January 2021, respectively. The fixed rate on the amounts hedged during these periods will be 4.25%, 4.25% ,and 4.75%, respectively. The total notional amount of these interest rate swaps in effect as of January 31, 2018 was $388.6 million. The total notional amount of these interest rate swaps in effect as of October 31, 2017 was $389.6 million.

Ciena expects the variable rate payments to be received under the terms of the interest rate swaps to offset exactly the forecasted variable rate payments on the equivalent notional amounts of the term loans. These derivative contracts have been designated as cash flow hedges.

Other information regarding Ciena's derivatives is immaterial for separate financial statement presentation. See Note 4 and Note 7 above.

XML

Accumulated Other Comprehensive Income

3 Months Ended

Jan. 31, 2018

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income

ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changesin accumulated balances of other comprehensive income ("AOCI") for the three months ended January 31, 2018:

	Unrealized Loss on			Unrealized Gain/(Loss) on			Unrealized Gain on Forward		Cumulative Foreign Currency
	Marketable Securities			Foreign Currency Contracts			Starting Interest Rate Swap		Translation Adjustment			Total
Balance at October 31, 2017	$	(451	)	$	(1,386	)	$	218	$	(9,398	)	$	(11,017	)
Other comprehensive income (loss) before reclassifications	(261		)	1,624			3,479		8,202			13,044
Amounts reclassified from AOCI	—			(71		)	419		—			348
Balance at January 31, 2018	$	(712	)	$	167		$	4,116	$	(1,196	)	$	2,375

The following table summarizes the changesin AOCI for the three months ended January 31, 2017:

	Unrealized Gain/(Loss) on			Unrealized Gain/(Loss) on			Unrealized Gain/(Loss) on Forward			Cumulative Foreign Currency
	Marketable Securities			Foreign Currency Contracts			Starting Interest Rate Swap			Translation Adjustment			Total
Balance at October 31, 2016	$	139		$	(1,091	)	$	(5,967	)	$	(17,410	)	$	(24,329	)
Other comprehensive income (loss) before reclassifications	(249		)	1,031			4,044			490			5,316
Amounts reclassified from AOCI	—			394			448			—			842
Balance at January 31, 2017	$	(110	)	$	334		$	(1,475	)	$	(16,920	)	$	(18,171	)

All amounts reclassified from AOCI related to settlement (gains) losses on foreign currency forward contracts designated as cash flow hedges impacted revenue or research and development expense on the Condensed Consolidated Statements of Operations. All amounts reclassified from AOCI related to settlement (gains) losses on forward starting interest rate swaps designated as cash flow hedges impacted interest and other income (loss), net on the Condensed Consolidated Statements of Operations.

XML

Short-Term and Long-Term Debt

3 Months Ended

Jan. 31, 2018

Debt Disclosure [Abstract]

Short-Term and Long-Term Debt

SHORT-TERM AND LONG-TERM DEBT

Outstanding Term Loan Payable

2022 Term Loan

The net carrying value of Ciena's Term Loan due January 30, 2022 (the "2022 Term Loan") was comprised of the following for the fiscal periods indicated (in thousands):

	January 31, 2018		October 31, 2017
Term Loan Payable due January 30, 2022	$	392,269	$	392,972

Deferred debt issuance costs that were deducted from the carrying amounts of the 2022 Term Loan totaled $2.9 million at January 31, 2018 and $3.1 million at October 31, 2017. 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 2022 Term Loan. The amortization of deferred debt issuance costs for the 2022 Term Loan is included in interest expense, and was $0.2 million during the first three months of fiscal 2018. There was no recorded amortization of deferred debt issuance costs for the 2022 Term Loan included in interest expense during the first three months of fiscal 2017. The carrying values of the 2022 Term Loan listed above are also net of any unamortized debt discounts.    

The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability components of Ciena's 2022 Term Loan were as follows as of January 31, 2018 (in thousands):

	Principal Balance		Unamortized Debt Discount			Deferred Debt Issuance Costs			Net Carrying Value
Term Loan Payable due January 30, 2022	$	397,000	$	(1,808	)	$	(2,923	)	$392,269

The following table sets forth the carrying value and the estimated fair value of Ciena's 2022 Term Loan (in thousands):

	January 31, 2018
	Carrying Value		Fair Value(1)
Term Loan Payable due January 30, 2022	$	392,269	$	397,993

(1) Ciena's term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2022 Term Loan using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

Outstanding Convertible Notes Payable

The net carrying values of Ciena's outstanding convertible notes payable was comprised of the following for the fiscal periods indicated (in thousands):

	January 31, 2018		October 31, 2017
3.75% Convertible Senior Notes due October 15, 2018 (Original)	$	61,125	$	61,071
3.75% Convertible Senior Notes due October 15, 2018 (New)	287,627		287,221
4.0% Convertible Senior Notes due December 15, 2020	196,333		194,717
	$	545,085	$	543,009

Deferred debt issuance costs that were deducted from the carrying amounts of the convertible notes payable totaled $1.7 million at January 31, 2018 and $2.1 million at October 31, 2017. 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 convertible notes payable. The amortization of deferred debt issuance costs is included in interest expense, and was $0.4 million and $0.5 million during the first three months of fiscal 2018 and 2017, respectively. The carrying values of the convertible notes payable listed above also include accretion of principal and are net of any unamortized debt discounts.

The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability and equity components of Ciena's outstanding issues of convertible notes were as follows as of January 31, 2018 (in thousands):

	Liability Component										Equity Component
	Principal Balance		Unamortized Debt Discount			Deferred Debt Issuance Costs			Net Carrying Value		Net Carrying Value
3.75% Convertible Senior Notes, due October 15, 2018 (Original)	$	61,270	$	—		$	(145	)	$	61,125	$	—
3.75% Convertible Senior Notes, due October 15, 2018 (New)	$	288,730	$	(423	)	$	(680	)	$	287,627	$	—
4.0% Convertible Senior Notes due December 15, 2020 (1)	$	205,906	$	(8,692	)	$	(881	)	$	196,333	$	43,131

(1) Includes accretion of principal at a rate of 1.85% per year

The following table sets forth, in thousands, the net carrying value and the estimated fair value of Ciena’s outstanding issues of convertible notes as of January 31, 2018:

	January 31, 2018
	Net Carrying Value		Fair Value(1)
3.75% Convertible Senior Notes, due October 15, 2018 (Original)	$	61,125	$	71,778
3.75% Convertible Senior Notes, due October 15, 2018 (New)	287,627		338,247
4.0% Convertible Senior Notes due December 15, 2020	196,333		246,281
	$	545,085	$	656,306

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

XML

Earnings Per Share Calculation

3 Months Ended

Jan. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Share Calculation

EARNINGS 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”). Basic EPS is computed using the weighted average number of common shares outstanding. Diluted EPS is computed using the weighted average number of the following, in each case, to the extent the effect is not anti-dilutive: (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; (iv) shares underlying Ciena’s outstanding convertible notes for which Ciena uses the treasury stock method (the New Notes); and (v) shares underlying Ciena’s outstanding convertible notes for which Ciena uses the if-converted method.

	Quarter Ended January 31,
Numerator	2018			2017
Net income (loss)	$	(473,363	)	$	3,861

	Quarter Ended January 31,
Denominator	2018	2017
Basic weighted average shares outstanding	143,922	140,682
Add: Shares underlying outstanding stock options and restricted stock units and issuable under employee stock purchase plan	—	1,502
Dilutive weighted average shares outstanding	143,922	142,184

	Quarter Ended January 31,
EPS	2018			2017
Basic EPS	$	(3.29	)	$	0.03
Diluted EPS	$	(3.29	)	$	0.03

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

	Quarter Ended January 31,
	2018	2017
Shares underlying stock options and restricted stock units	3,414	1,556
0.875% Convertible Senior Notes due June 15, 2017	—	5,564
3.75% Convertible Senior Notes due October 15, 2018 (Original)	3,038	17,355
3.75% Convertible Senior Notes due October 15, 2018 (New) (1)	691	—
4.0% Convertible Senior Notes due December 15, 2020	9,198	9,198
Total shares excluded due to anti-dilutive effect	16,341	33,673

(1) Since Ciena intends, upon any conversion of the outstanding 3.75% Convertible Senior Notes due 2018 (New Notes), to settle the principal amount thereof in cash, Ciena uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The 14.3 million shares underlying the New Notes will have a dilutive impact on diluted net income per share of common stock when the average market price of Ciena common stock for a given period exceeds the conversion price of $20.17 per share for the New Notes. During the first quarter of fiscal 2018, the average market price of Ciena common stock was $21.19 and, as such, the New Notes are dilutive by the conversion spread, or 0.7 million shares.

XML

Stockholders' Equity

3 Months Ended

Jan. 31, 2018

Equity [Abstract]

Stockholders' Equity

STOCKHOLDERS' EQUITY

Adoption of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting

In connection with the adoption of ASU 2016-09, Ciena recognized approximately $62.1 million of deferred tax assets related to previously unrecognized tax benefits. This was recorded as a cumulative-effect adjustment to retained earnings as of the beginning of the first quarter of fiscal 2018. Ciena also elected to recognize forfeitures of stock awards when they occur, rather than estimate the impact of forfeitures when the award is granted. Accordingly, Ciena recognized approximately $0.8 million for this change through a cumulative effect adjustment recorded to opening retained earnings in the period of adoption.

Stock Repurchase Program

On December 7, 2017, Ciena announced that its Board of Directors authorized a program to repurchase up to $300 million of Ciena’s common stock through the end of fiscal 2020. Ciena may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. Ciena may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price, and general business and market conditions. The program may be modified, suspended, or discontinued at any time.

A summary of the stock repurchase program, reported based on trade date, is summarized as follows:

	Shares Repurchased	Weighted-Average Price per Share		Amount Repurchased (in thousands)
Cumulative balance at October 31, 2017	—	$	—	$	—
Repurchase of common stock under the stock repurchase program	262,487	21.92		5,755
Cumulative balance at January 31, 2018	262,487	$	21.92	$	5,755

The purchase price for the shares of Ciena's stock repurchased is reflected as a reduction to stockholders' equity. Ciena is required to allocate the purchase price of the repurchased shares as a reduction of common stock and additional paid-in capital.

XML

Share-Based Compensation Expense

3 Months Ended

Jan. 31, 2018

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

Share-Based Compensation Expense

SHARE-BASED COMPENSATION EXPENSE

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

	Quarter Ended January 31,
	2018		2017
Product costs	$	672	$	561
Service costs	625		628
Share-based compensation expense included in cost of sales	1,297		1,189
Research and development	3,255		3,209
Sales and marketing	3,328		2,873
General and administrative	4,474		5,453
Share-based compensation expense included in operating expense	11,057		11,535
Share-based compensation expense capitalized in inventory, net	39		101
Total share-based compensation	$	12,393	$	12,825

As of January 31, 2018, total unrecognized share-based compensation expense was approximately $100.1 million, consisting of: (i) $0.1 million, which relates to unvested stock options and is expected to be recognized over a weighted-average period of 0.8 years; and (ii) $100.0 million, which relates to unvested restricted stock units and is expected to be recognized over a weighted-average period of 1.7 years.

XML

Segments and Entity-Wide Disclosures

3 Months Ended

Jan. 31, 2018

Segment Reporting [Abstract]

Segments 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:

• Networking Platforms reflects sales of Ciena’s Converged Packet Optical and Packet Networking product lines.

◦ Converged Packet Optical — includes the 6500 Packet-Optical Platform, the 5430 Reconfigurable Switching System, Waveserver stackable interconnect system, the family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform. In addition, as of the first quarter of fiscal 2018, sales of Optical Transport products are reflected within the Converged Packet Optical product line for all periods presented.

◦ Packet Networking — includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform and the Ethernet packet configuration for the 5410 Service Aggregation Switch.

The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Condensed Consolidated Statements of Operations.

• Software and Software-Related Services reflects sales of Ciena’s network virtualization, management, control and orchestration software solutions and software-related services, including subscription, installation, support, and consulting services.

◦ This segment includes Ciena’s Blue Planet network virtualization, service orchestration and network management software platform. Ciena's Blue Planet platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), and Ciena's manage, control and plan (MCP) solution, SDN Multilayer Controller and V-WAN application.

◦ This segment includes Ciena’s element and network management solutions and planning tools, including the OneControl Unified Management System, ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. As Ciena seeks adoption of its Blue Planet software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other element and network management solutions.

Revenue from the software platforms portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from software-related services is included in services revenue on the Condensed Consolidated Statements of Operations.

• Global Services reflects sales of a broad range of Ciena’s services for consulting and network design, installation and deployment, maintenance support and training activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena's long-lived assets, including equipment, building, furniture and fixtures, finite-lived intangible assets and maintenance spares, are not reviewed by Ciena's chief operating decision maker for purposes of evaluating performance and allocating resources. As of January 31, 2018, equipment, building, furniture and fixtures, net totaled $318.8 million primarily supporting asset groups within Ciena's Networking Platforms and Software and Software-Related Services segments and supporting Ciena's unallocated selling and general and administrative activities. As of January 31, 2018, $36.9 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Networking Platforms segment and $59.6 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Software and Software-Related Services segment. As of January 31, 2018, all of the maintenance spares, net, totaling $43.7 million, were assigned to asset groups within Ciena's Global Services segment.

Segment Revenue

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

	Quarter Ended January 31,
	2018		2017
Revenue:
Networking Platforms
Converged Packet Optical	$	427,401	$	417,750
Packet Networking	68,632		72,194
Total Networking Platforms	496,033		489,944
Software and Software-Related Services
Software Platforms	29,576		17,049
Software-Related Services	23,911		22,331
Total Software and Software-Related Services	53,487		39,380
Global Services
Maintenance Support and Training	55,958		54,990
Installation and Deployment	30,016		27,919
Consulting and Network Design	10,641		9,264
Total Global Services	96,615		92,173
Consolidated revenue	$	646,135	$	621,497

Segment Profit

Segment profit is determined based on internal performance measures used by Ciena's 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; significant asset impairments and restructuring costs; interest and other income (loss), net; interest expense; and provisions for income taxes.

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

	Quarter Ended January 31,
	2018			2017
Segment profit:
Networking Platforms	$	88,569		$	113,747
Software and Software-Related Services	23,635			7,700
Global Services	41,037			35,469
Total segment profit	153,241			156,916
Less: Non-performance operating expenses
Selling and marketing	88,515			85,002
General and administrative	38,406			35,864
Amortization of intangible assets	3,623			14,551
Significant asset impairments and restructuring costs	5,961			2,395
Add: Other non-performance financial items
Interest expense and other income (loss), net	(12,159		)	(14,833		)
Less: Provision for income taxes	477,940			410
Consolidated net income (loss)	$	(473,363	)	$	3,861

Entity-Wide Reporting

Ciena's revenue includes $383.4 million and $379.7 million of U.S. revenue for the first quarter of fiscal 2018 and 2017, respectively. There were no other countries that accounted for more than 10% of Ciena's revenue in the first quarter of fiscal 2018 and 2017.

The following table reflects Ciena's geographic distribution of equipment, building, furniture and fixtures, net, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, specifically identified. Equipment, building, furniture and fixtures, net, attributable to geographic regions outside of the U.S. and Canada are reflected as “Other International.” For the periods below, Ciena's geographic distribution of equipment, building, furniture and fixtures was as follows (in thousands):

	January 31, 2018		October 31, 2017
Canada	$	212,142	$	203,491
United States	86,836		90,482
Other International	19,857		14,492
Total	$	318,835	$	308,465

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

	Quarter Ended January 31,
	2018		2017
AT&T	$	90,645	$	96,437
Verizon	68,445		73,089
Total	$	159,090	$	169,526

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

XML

Commitments and Contingencies

3 Months Ended

Jan. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Foreign Tax Contingencies

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

Litigation

As a result of the acquisition of Cyan in August 2015, Ciena became a defendant in a securities class action lawsuit. On April 1, 2014, a purported stockholder class action lawsuit was filed in the Superior Court of California, County of San Francisco, against Cyan, the members of Cyan’s board of directors, Cyan’s former Chief Financial Officer, and the underwriters of Cyan’s initial public offering. On April 30, 2014, a substantially similar lawsuit was filed in the same court against the same defendants. The two cases have been consolidated as Beaver County Employees Retirement Fund, et al. v. Cyan, Inc. et al., Case No. CGC-14-538355. The consolidated complaint alleges violations of federal securities laws on behalf of a purported class consisting of purchasers of Cyan’s common stock pursuant or traceable to the registration statement and prospectus for Cyan’s initial public offering in April 2013, and seeks unspecified compensatory damages and other relief. On May 19, 2015, the proposed class was certified. On August 25, 2015, the defendants filed a motion for judgment on the pleadings based on an alleged lack of subject matter jurisdiction over the case, which motion was denied on October 23, 2015. On May 24, 2016, the defendants filed a petition for a writ of certiorari on the jurisdiction issue with the U.S. Supreme Court, which petition was granted on June 27, 2017. On November 18, 2016, the Superior Court stayed the case pending the outcome of the Supreme Court’s decision. Oral argument was heard by the Supreme Court on this matter on November 28, 2017. Ciena believes that the consolidated lawsuit is without merit and intends to defend it vigorously.

Internal Investigations

During fiscal 2017, one of Ciena’s third-party vendors raised allegations about certain questionable payments to one or more individuals employed by a customer in a country in the ASEAN region. Ciena promptly initiated an internal investigation into the matter, with the assistance of outside counsel, which investigation corroborated direct and indirect payments to one such individual and sought to determine whether the payments may have violated applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act (“FCPA”). In September 2017, Ciena voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them of the relevant events and the findings of Ciena’s internal investigation. With the direct oversight of Ciena's Board of Directors, Ciena continues to cooperate fully with the SEC and DOJ in their review of the investigation.

Ciena’s operations in the relevant country have constituted less than 1.5% of consolidated revenues as reported by Ciena in each fiscal year since 2012. Ciena does not currently anticipate that this matter will have a material adverse effect on its business, financial condition or results of operations. However, as discussions with the SEC and DOJ are ongoing, the ultimate outcome of this matter cannot be predicted at this time. As of the filing of this Report, no provision with respect to this matter has been made in Ciena’s consolidated financial statements. Any determination that Ciena’s operations or activities are not in compliance with the FCPA or other applicable laws or regulations could result in the imposition of fines, civil and criminal penalties, and equitable remedies, including disgorgement or injunctive relief.

In addition to the matters described in “Litigation” and “Internal Investigations” above, Ciena is subject to various legal proceedings, claims and other matters arising in the ordinary course of business, including those that relate to employment, commercial, tax and other regulatory matters. Ciena is also subject to intellectual property related claims, 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 such matters will have a material effect on its results of operations, financial position or cash flows.

XML

Subsequent Event

3 Months Ended

Jan. 31, 2018

Subsequent Events [Abstract]

Subsequent Event

SUBSEQUENT EVENT

Stock Repurchase Program

From the end of the first quarter of fiscal 2018 through March 5, 2018, Ciena repurchased an additional 611,514 shares of its common stock, for an aggregate purchase price of  $13.8 million at an average price of $22.52 per share, including of repurchases pending settlement. As of March 5, 2018, Ciena has an aggregate of $280.5 million of authorized funds remaining under its Stock Repurchase Program.

XML

Recent Accounting Pronouncements (Policies)

3 Months Ended

Jan. 31, 2018

Accounting Policies [Abstract]

Newly Issued Accounting Standards - Effective and Not Yet Effective

Newly Issued Accounting Standards - Effective

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01 ("ASU 2017-01"), Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition or disposal of assets or businesses. The amendments in this update provide a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. Ciena will evaluate the effect of the update at the time of any future acquisition or disposal. Ciena adopted ASU 2017-01 during the first quarter of fiscal 2018.

In August 2017, the FASB issued ASU No. 2017-12 ("ASU 2017-12"), Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships, through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. Ciena adopted ASU 2017-12 during the first quarter of fiscal 2018. For hedges for which Ciena has elected to exclude the spot-forward difference from assessment of effectiveness, Ciena has elected to amortize the difference on a straight-line basis. Ciena will record amortization in earnings each period with an offsetting entry to other comprehensive income, and all changes in fair value over the term of the derivative in other comprehensive income. The application of this accounting standard did not have a material impact on Ciena's Condensed Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-09 ("ASU 2016-09"), Improvements to Employee Share-Based Payment Accounting, which provides guidance on several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. ASU 2016-09 is effective for Ciena beginning in the first quarter of fiscal 2018. In connection with the adoption of this guidance, Ciena recognized approximately $62.1 million of deferred tax assets related to previously unrecognized tax benefits. This was recorded as a cumulative-effect adjustment to retained earnings as of the beginning of the first quarter of fiscal 2018. Additionally, the consolidated statements of cash flows will include excess tax benefits as an operating activity, on a prospective basis as a result of the adoption. Finally, Ciena has elected to recognize forfeitures when they occur, rather than to estimate the impact of forfeitures when the award is granted. Accordingly, Ciena recognized approximately $0.8 million for this change through a cumulative effect adjustment recorded to opening retained earnings in the first quarter of fiscal 2018.

Newly Issued Accounting Standards - Not Yet Effective

In May 2014, the FASB issued ASU No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition. ASU 2014-09 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. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. 

For multiple element software arrangements where vendor-specific objective evidence ("VSOE") of undelivered maintenance does not exist, Ciena currently recognizes revenue for the entire arrangement over the maintenance term. Ciena expects that the adoption of ASU 2014-09 will require that it determine the stand alone selling price for each of the software and software-related deliverables at contract inception, and Ciena consequently expects certain software deliverables will be recognized at a point in time rather than over a period of time.

Ciena also expects certain installation and deployment, and consulting and network design services, will be recognized over a period of time rather than at a point in time.

Ciena has considered the impact of the guidance in Accounting Standards Codification ("ASC") 340-40, Other Assets and Deferred Costs; Contracts with Customers, and the interpretations of the FASB Transition Resource Group for Revenue Recognition (TRG) with respect to capitalization and amortization of incremental costs of obtaining a contract. In conjunction with this interpretation, Ciena has elected to implement the practical expedient clause allowing for incremental costs to be recognized as an expense when incurred if the period of the asset recognition is one year or less, and amortized over the period of performance, if the period of the asset recognition is greater than one year.   

Ciena expects to implement this standard using the modified retrospective approach whereby the cumulative effect at adoption will be presented as an adjustment to the opening balance of retained earnings. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for those periods. ASU 2014-09 will be effective for Ciena beginning in the first quarter of fiscal 2019. Ciena is continuing to evaluate other possible impacts of the adoption of this ASU on its Consolidated Financial Statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"), Leases, which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and to provide additional disclosures. ASU 2016-02 is effective for Ciena beginning in the first quarter of fiscal 2020. Under current GAAP, the majority of Ciena’s leases for its properties are considered operating leases, and Ciena expects that the adoption of this ASU will require these leases to be classified as financing leases and to be recognized as assets and liabilities on Ciena’s balance sheet. Ciena is continuing to evaluate other possible impacts of the adoption of ASU 2016-02 on its Consolidated Financial Statements and disclosures.

XML

Restructuring Costs (Tables)

3 Months Ended

Jan. 31, 2018

Restructuring and Related Activities [Abstract]

Schedule of 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 three months ended January 31, 2018 (in thousands):

	Workforce reduction				Consolidation of excess facilities				Total
Balance at October 31, 2017	$	1,291			$	1,648			$	2,939
Additional liability recorded	4,413			(1)	1,548			(2)	5,961
Cash payments	(4,459		)		(1,282		)		(5,741		)
Balance at January 31, 2018	$	1,245			$	1,914			$	3,159
Current restructuring liabilities	$	1,245			$	590			$	1,835
Non-current restructuring liabilities	$	—			$	1,324			$	1,324

(1) Reflects a global workforce reduction of approximately 100 employees during the first quarter of fiscal 2018 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

(2) Reflects unfavorable lease commitments in connection with a portion of facilities located in Petaluma, California.

The following table sets forth the restructuring activity and balance of the restructuring liability accounts for the three months ended January 31, 2017 (in thousands):

	Workforce reduction			Consolidation of excess facilities			Total
Balance at October 31, 2016	$	868		$	1,970		$	2,838
Additional liability recorded	2,008			387			2,395
Cash payments	(2,512		)	(652		)	(3,164		)
Balance at January 31, 2017	$	364		$	1,705		$	2,069
Current restructuring liabilities	$	364		$	1,269		$	1,633
Non-current restructuring liabilities	$	—		$	436		$	436

XML

Interest and Other Income (Loss), Net (Tables)

3 Months Ended

Jan. 31, 2018

Other Income and Expenses [Abstract]

Schedule of Interest and Other Income (Loss), Net

The components of interest and other income (loss), net, are as follows (in thousands):

	Quarter Ended January 31,
	2018			2017
Interest income	$	2,444		$	1,282
Gains (losses) on non-hedge designated foreign currency forward contracts	(699		)	1,024
Foreign currency exchange gain (loss)	13			(2,417		)
Other	(183		)	481
Interest and other income (loss), net	$	1,575		$	370

XML

Income Taxes (Tables)

3 Months Ended

Jan. 31, 2018

Income Tax Disclosure [Abstract]

Schedule of Significant Components of Deferred Tax Assets and Liabilities

The significant components of DTA are as follows (in thousands):

	January 31,			October 31,
	2018			2017
Deferred tax assets:
Reserves and accrued liabilities	$	36,706		$	56,597
Depreciation and amortization	274,974			451,385
NOL and credit carry forward	560,603			803,622
Other	18,224			29,398
Gross deferred tax assets	890,507			1,341,002
Valuation allowance	(151,061		)	(185,898		)
Deferred tax asset, net of valuation allowance	$	739,446		$	1,155,104

XML

Short-Term and Long-Term Investments (Tables)

3 Months Ended

Jan. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of Short-Term and Long-Term Investments

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

	January 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	239,404	$	—	(530		)	$	238,874
Included in long-term investments	59,313		—		(162		)	59,151
	$	298,717	$	—	$	(692	)	$	298,025
Commercial paper:
Included in short-term investments	$	39,868	1		—			$	39,869
	$	39,868	$	1	$	—		$	39,869

	October 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	249,498	$	—	$	(305	)	$	249,193
Included in long-term investments	49,910		—		(127		)	49,783
	$	299,408	$	—	$	(432	)	$	298,976
Commercial paper:
Included in short-term investments	$	29,939	1		—			$	29,940
	$	29,939	$	1	$	—		$	29,940

Schedule of Legal Maturities of Debt Investments

The following table summarizes the final legal maturities of debt investments at January 31, 2018 (in thousands):

	Amortized Cost		Estimated Fair Value
Less than one year	$	279,272	$	278,743
Due in 1-2 years	59,313		59,151
	$	338,585	$	337,894

XML

Fair Value Measurements (Tables)

3 Months Ended

Jan. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of the Fair Value of Assets and Liabilities Recorded on a Recurring Basis

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

	January 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	521,698	$	—	$	—	$	521,698
U.S. government obligations	—		298,025		—		298,025
Commercial paper	—		69,810		—		69,810
Foreign currency forward contracts	—		3,730		—		3,730
Forward starting interest rate swaps	—		4,117		—		4,117
Total assets measured at fair value	$	521,698	$	375,682	$	—	$	897,380
Liabilities:
Foreign currency forward contracts	$	—	$	2,415	$	—	$	2,415
Total liabilities measured at fair value	$	—	$	2,415	$	—	$	2,415

	October 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	511,355	$	—	$	—	$	511,355
U.S. government obligations	—		298,976		—		298,976
Commercial paper	—		89,865		—		89,865
Foreign currency forward contracts	—		227		—		227
Forward starting interest rate swaps	—		218		—		218
Total assets measured at fair value	$	511,355	$	389,286	$	—	$	900,641
Liabilities:
Foreign currency forward contracts	$	—	$	2,129	$	—	$	2,129
Total liabilities measured at fair value	$	—	$	2,129	$	—	$	2,129

Schedule of Assets and Liabilities as Presented on Ciena's Condensed Consolidated Balance Sheets

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

	January 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	521,698	$	29,941	$	—	$	551,639
Short-term investments	—		278,743		—		278,743
Prepaid expenses and other	—		3,730		—		3,730
Long-term investments	—		59,151		—		59,151
Other long-term assets	—		4,117		—		4,117
Total assets measured at fair value	$	521,698	$	375,682	$	—	$	897,380
Liabilities:
Accrued liabilities	$	—	$	2,415	$	—	$	2,415
Total liabilities measured at fair value	$	—	$	2,415	$	—	$	2,415

	October 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	511,355	$	59,925	$	—	$	571,280
Short-term investments	—		279,133		—		279,133
Prepaid expenses and other	—		227		—		227
Long-term investments	—		49,783		—		49,783
Other long-term assets	—		218		—		218
Total assets measured at fair value	$	511,355	$	389,286	$	—	$	900,641
Liabilities:
Accrued liabilities	$	—	$	2,129	$	—	$	2,129
Total liabilities measured at fair value	$	—	$	2,129	$	—	$	2,129

XML

Inventories (Tables)

3 Months Ended

Jan. 31, 2018

Inventory Disclosure [Abstract]

Schedule of Inventories

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

	January 31, 2018			October 31, 2017
Raw materials	$	47,710		$	52,898
Work-in-process	16,444			18,623
Finished goods	176,426			185,488
Deferred cost of goods sold	64,445			61,340
	305,025			318,349
Provision for excess and obsolescence	(49,774		)	(51,206		)
	$	255,251		$	267,143

XML

Accrued Liabilities and Other Short-Term Obligations (Tables)

3 Months Ended

Jan. 31, 2018

Balance Sheet Related Disclosures [Abstract]

Schedule of Accrued Liabilities

As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands):

	January 31, 2018		October 31, 2017
Compensation, payroll related tax and benefits(1)	$	68,526	$	113,272
Warranty	42,526		42,456
Vacation	39,628		39,778
Capital lease obligations	3,934		3,772
Interest payable	4,867		3,612
Other	108,683		120,044
	$	268,164	$	322,934

(1) Reduction is primarily due to the timing of bonus payments to employees under Ciena's annual cash incentive compensation plan.

Schedule of Accrued Warranties

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

Three Months Ended January 31,	Beginning Balance		Current Period Provisions (1)	Settlements		Ending Balance
2017	$	52,324	553	(4,225	)	$	48,652
2018	$	42,456	4,657	(4,587	)	$	42,526

(1) As a result of lower than expected actual failure rates, Ciena adjusted its fiscal 2017 provision for warranty. These adjustments for previous years provisions had the effect of reducing warranty provision by $3.6 million for the three months ended January 31, 2017.

XML

Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Jan. 31, 2018

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income

The following table summarizes the changesin accumulated balances of other comprehensive income ("AOCI") for the three months ended January 31, 2018:

	Unrealized Loss on			Unrealized Gain/(Loss) on			Unrealized Gain on Forward		Cumulative Foreign Currency
	Marketable Securities			Foreign Currency Contracts			Starting Interest Rate Swap		Translation Adjustment			Total
Balance at October 31, 2017	$	(451	)	$	(1,386	)	$	218	$	(9,398	)	$	(11,017	)
Other comprehensive income (loss) before reclassifications	(261		)	1,624			3,479		8,202			13,044
Amounts reclassified from AOCI	—			(71		)	419		—			348
Balance at January 31, 2018	$	(712	)	$	167		$	4,116	$	(1,196	)	$	2,375

The following table summarizes the changesin AOCI for the three months ended January 31, 2017:

	Unrealized Gain/(Loss) on			Unrealized Gain/(Loss) on			Unrealized Gain/(Loss) on Forward			Cumulative Foreign Currency
	Marketable Securities			Foreign Currency Contracts			Starting Interest Rate Swap			Translation Adjustment			Total
Balance at October 31, 2016	$	139		$	(1,091	)	$	(5,967	)	$	(17,410	)	$	(24,329	)
Other comprehensive income (loss) before reclassifications	(249		)	1,031			4,044			490			5,316
Amounts reclassified from AOCI	—			394			448			—			842
Balance at January 31, 2017	$	(110	)	$	334		$	(1,475	)	$	(16,920	)	$	(18,171	)

XML

Short-Term and Long-Term Debt (Tables)

3 Months Ended

Jan. 31, 2018

Debt Disclosure [Abstract]

Schedule of Carrying Values and Estimated Fair Values of Convertible Notes

The net carrying values of Ciena's outstanding convertible notes payable was comprised of the following for the fiscal periods indicated (in thousands):

	January 31, 2018		October 31, 2017
3.75% Convertible Senior Notes due October 15, 2018 (Original)	$	61,125	$	61,071
3.75% Convertible Senior Notes due October 15, 2018 (New)	287,627		287,221
4.0% Convertible Senior Notes due December 15, 2020	196,333		194,717
	$	545,085	$	543,009

The net carrying value of Ciena's Term Loan due January 30, 2022 (the "2022 Term Loan") was comprised of the following for the fiscal periods indicated (in thousands):

	January 31, 2018		October 31, 2017
Term Loan Payable due January 30, 2022	$	392,269	$	392,972

The following table sets forth, in thousands, the net carrying value and the estimated fair value of Ciena’s outstanding issues of convertible notes as of January 31, 2018:

	January 31, 2018
	Net Carrying Value		Fair Value(1)
3.75% Convertible Senior Notes, due October 15, 2018 (Original)	$	61,125	$	71,778
3.75% Convertible Senior Notes, due October 15, 2018 (New)	287,627		338,247
4.0% Convertible Senior Notes due December 15, 2020	196,333		246,281
	$	545,085	$	656,306

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

The following table sets forth the carrying value and the estimated fair value of Ciena's 2022 Term Loan (in thousands):

	January 31, 2018
	Carrying Value		Fair Value(1)
Term Loan Payable due January 30, 2022	$	392,269	$	397,993

(1) Ciena's term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2022 Term Loan using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

Schedule of Debt Details

The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability and equity components of Ciena's outstanding issues of convertible notes were as follows as of January 31, 2018 (in thousands):

	Liability Component										Equity Component
	Principal Balance		Unamortized Debt Discount			Deferred Debt Issuance Costs			Net Carrying Value		Net Carrying Value
3.75% Convertible Senior Notes, due October 15, 2018 (Original)	$	61,270	$	—		$	(145	)	$	61,125	$	—
3.75% Convertible Senior Notes, due October 15, 2018 (New)	$	288,730	$	(423	)	$	(680	)	$	287,627	$	—
4.0% Convertible Senior Notes due December 15, 2020 (1)	$	205,906	$	(8,692	)	$	(881	)	$	196,333	$	43,131

(1) Includes accretion of principal at a rate of 1.85% per year

The principal balance, unamortized debt discount, deferred debt issuance costs and net carrying value of the liability components of Ciena's 2022 Term Loan were as follows as of January 31, 2018 (in thousands):

	Principal Balance		Unamortized Debt Discount			Deferred Debt Issuance Costs			Net Carrying Value
Term Loan Payable due January 30, 2022	$	397,000	$	(1,808	)	$	(2,923	)	$392,269

XML

Earnings Per Share Calculation (Tables)

3 Months Ended

Jan. 31, 2018

Earnings Per Share [Abstract]

Schedule of Reconciliation of Numerator and Denominator of Basic and Diluted Earnings Per Share

	Quarter Ended January 31,
Numerator	2018			2017
Net income (loss)	$	(473,363	)	$	3,861

	Quarter Ended January 31,
Denominator	2018	2017
Basic weighted average shares outstanding	143,922	140,682
Add: Shares underlying outstanding stock options and restricted stock units and issuable under employee stock purchase plan	—	1,502
Dilutive weighted average shares outstanding	143,922	142,184

	Quarter Ended January 31,
EPS	2018			2017
Basic EPS	$	(3.29	)	$	0.03
Diluted EPS	$	(3.29	)	$	0.03

Schedule of 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 Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands):

	Quarter Ended January 31,
	2018	2017
Shares underlying stock options and restricted stock units	3,414	1,556
0.875% Convertible Senior Notes due June 15, 2017	—	5,564
3.75% Convertible Senior Notes due October 15, 2018 (Original)	3,038	17,355
3.75% Convertible Senior Notes due October 15, 2018 (New) (1)	691	—
4.0% Convertible Senior Notes due December 15, 2020	9,198	9,198
Total shares excluded due to anti-dilutive effect	16,341	33,673

(1) Since Ciena intends, upon any conversion of the outstanding 3.75% Convertible Senior Notes due 2018 (New Notes), to settle the principal amount thereof in cash, Ciena uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The 14.3 million shares underlying the New Notes will have a dilutive impact on diluted net income per share of common stock when the average market price of Ciena common stock for a given period exceeds the conversion price of $20.17 per share for the New Notes. During the first quarter of fiscal 2018, the average market price of Ciena common stock was $21.19 and, as such, the New Notes are dilutive by the conversion spread, or 0.7 million shares.

XML

Stockholders' Equity (Tables)

3 Months Ended

Jan. 31, 2018

Equity [Abstract]

Schedule of Stock Repurchase Program

A summary of the stock repurchase program, reported based on trade date, is summarized as follows:

	Shares Repurchased	Weighted-Average Price per Share		Amount Repurchased (in thousands)
Cumulative balance at October 31, 2017	—	$	—	$	—
Repurchase of common stock under the stock repurchase program	262,487	21.92		5,755
Cumulative balance at January 31, 2018	262,487	$	21.92	$	5,755

XML

Share-Based Compensation Expense (Tables)

3 Months Ended

Jan. 31, 2018

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

Schedule of Share-Based Compensation Expense

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

	Quarter Ended January 31,
	2018		2017
Product costs	$	672	$	561
Service costs	625		628
Share-based compensation expense included in cost of sales	1,297		1,189
Research and development	3,255		3,209
Sales and marketing	3,328		2,873
General and administrative	4,474		5,453
Share-based compensation expense included in operating expense	11,057		11,535
Share-based compensation expense capitalized in inventory, net	39		101
Total share-based compensation	$	12,393	$	12,825

XML

Segments and Entity-Wide Disclosures (Tables)

3 Months Ended

Jan. 31, 2018

Segment Reporting [Abstract]

Schedule of Segment Revenue

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

	Quarter Ended January 31,
	2018		2017
Revenue:
Networking Platforms
Converged Packet Optical	$	427,401	$	417,750
Packet Networking	68,632		72,194
Total Networking Platforms	496,033		489,944
Software and Software-Related Services
Software Platforms	29,576		17,049
Software-Related Services	23,911		22,331
Total Software and Software-Related Services	53,487		39,380
Global Services
Maintenance Support and Training	55,958		54,990
Installation and Deployment	30,016		27,919
Consulting and Network Design	10,641		9,264
Total Global Services	96,615		92,173
Consolidated revenue	$	646,135	$	621,497

Schedule of 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 income (loss) during the respective periods indicated:

	Quarter Ended January 31,
	2018			2017
Segment profit:
Networking Platforms	$	88,569		$	113,747
Software and Software-Related Services	23,635			7,700
Global Services	41,037			35,469
Total segment profit	153,241			156,916
Less: Non-performance operating expenses
Selling and marketing	88,515			85,002
General and administrative	38,406			35,864
Amortization of intangible assets	3,623			14,551
Significant asset impairments and restructuring costs	5,961			2,395
Add: Other non-performance financial items
Interest expense and other income (loss), net	(12,159		)	(14,833		)
Less: Provision for income taxes	477,940			410
Consolidated net income (loss)	$	(473,363	)	$	3,861

Schedule of Ciena's Geographic Distribution of Revenue and Long-Lived Assets

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

	January 31, 2018		October 31, 2017
Canada	$	212,142	$	203,491
United States	86,836		90,482
Other International	19,857		14,492
Total	$	318,835	$	308,465

Schedule of Revenue by Major Customers by Reporting Segments

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

	Quarter Ended January 31,
	2018		2017
AT&T	$	90,645	$	96,437
Verizon	68,445		73,089
Total	$	159,090	$	169,526

XML

Interim Financial Statements (Details)	3 Months Ended
	Jan. 31, 2018
Quarterly Financial Data [Abstract]
Fiscal year	52 or 53-week fiscal year

XML

Recent Accounting Pronouncements (Details) $ in Thousands	Oct. 31, 2017 USD ($)
Significant Accounting Policies [Line Items]
Cumulative adjustment	$ 62,123
Retained earnings
Significant Accounting Policies [Line Items]
Cumulative adjustment	61,291
Retained earnings | ASU 2016-09, Excess tax benefit component
Significant Accounting Policies [Line Items]
Cumulative adjustment	62,100
Retained earnings | ASU 2016-09, Forfeiture rate component
Significant Accounting Policies [Line Items]
Cumulative adjustment	$ 800

XML

Restructuring Costs (Details) $ in Thousands	3 Months Ended
	Jan. 31, 2018 USD ($) employee	Jan. 31, 2017 USD ($)
Activity and balance of the restructuring liability accounts
Balance at beginning of period	$ 2,939	$ 2,838
Additional liability recorded	5,961	2,395
Cash payments	(5,741)	(3,164)
Balance at end of period	3,159	2,069
Current restructuring liabilities	1,835	1,633
Non-current restructuring liabilities	$ 1,324	436
Workforce reduction
Restructuring Cost and Reserve [Line Items]
Number of employee reduction | employee	100
Activity and balance of the restructuring liability accounts
Balance at beginning of period	$ 1,291	868
Additional liability recorded	4,413	2,008
Cash payments	(4,459)	(2,512)
Balance at end of period	1,245	364
Current restructuring liabilities	1,245	364
Non-current restructuring liabilities	0	0
Consolidation of excess facilities
Activity and balance of the restructuring liability accounts
Balance at beginning of period	1,648	1,970
Additional liability recorded	1,548	387
Cash payments	(1,282)	(652)
Balance at end of period	1,914	1,705
Current restructuring liabilities	590	1,269
Non-current restructuring liabilities	$ 1,324	$ 436

XML

Interest and Other Income (Loss), Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Other Income and Expenses [Abstract]
Interest income	$ 2,444	$ 1,282
Gains (losses) on non-hedge designated foreign currency forward contracts	(699)	1,024
Foreign currency exchange gain (loss)	13	(2,417)
Other	(183)	481
Interest and other income (loss), net	$ 1,575	$ 370

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jan. 31, 2018	Oct. 31, 2018	Oct. 31, 2017
Income Tax Contingency [Line Items]
Provisional tax expense	$ 477,900
Remeasurement of net DTA	431,300
U.S. transition tax	45,600
Unrecognized deferred income tax liability	22,000
Cumulative adjustment			$ 62,123
Deferred tax asset, net	739,446		1,155,104
Valuation allowance	$ 151,061		185,898
Scenario, Forecast
Income Tax Contingency [Line Items]
Blended federal tax rate		23.40%
Retained earnings
Income Tax Contingency [Line Items]
Cumulative adjustment			61,291
ASU 2016-09, Excess tax benefit component
Income Tax Contingency [Line Items]
Deferred tax asset, net			62,100
ASU 2016-09, Excess tax benefit component | Retained earnings
Income Tax Contingency [Line Items]
Cumulative adjustment			$ 62,100

XML

Income Taxes - Significant Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Deferred Tax Assets, Net [Abstract]
Reserves and accrued liabilities	$ 36,706	$ 56,597
Depreciation and amortization	274,974	451,385
NOL and credit carry forward	560,603	803,622
Other	18,224	29,398
Gross deferred tax assets	890,507	1,341,002
Valuation allowance	(151,061)	(185,898)
Deferred tax asset, net of valuation allowance	$ 739,446	$ 1,155,104

XML

Short-Term and Long-Term Investments (Details) - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 338,585
Estimated Fair Value	337,894
U.S. government obligations
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	298,717	$ 299,408
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(692)	(432)
Estimated Fair Value	298,025	298,976
U.S. government obligations | Included in short-term investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	239,404	249,498
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(530)	(305)
Estimated Fair Value	238,874	249,193
U.S. government obligations | Included in long-term investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	59,313	49,910
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(162)	(127)
Estimated Fair Value	59,151	49,783
Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	39,868	29,939
Gross Unrealized Gains	1	1
Gross Unrealized Losses	0	0
Estimated Fair Value	39,869	29,940
Commercial paper | Included in short-term investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	39,868	29,939
Gross Unrealized Gains	1	1
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 39,869	$ 29,940

XML

Short-Term and Long-Term Investments - Legal Maturities of Debt Investments (Details) $ in Thousands	Jan. 31, 2018 USD ($)
Amortized Cost
Less than one year	$ 279,272
Due in 1-2 years	59,313
Amortized Cost	338,585
Estimated Fair Value
Less than one year	278,743
Due in 1-2 years	59,151
Estimated Fair Value	$ 337,894

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Assets:
U.S. government obligations	$ 337,894
Fair value, Measurements, Recurring
Assets:
Money market funds	521,698	$ 511,355
U.S. government obligations	298,025	298,976
Commercial paper	69,810	89,865
Foreign currency forward contracts	3,730	227
Forward starting interest rate swaps	4,117	218
Total assets measured at fair value	897,380	900,641
Liabilities:
Foreign currency forward contracts	2,415	2,129
Total liabilities measured at fair value	2,415	2,129
Fair value, Measurements, Recurring | Level 1
Assets:
Money market funds	521,698	511,355
U.S. government obligations	0	0
Commercial paper	0	0
Foreign currency forward contracts	0	0
Forward starting interest rate swaps	0	0
Total assets measured at fair value	521,698	511,355
Liabilities:
Foreign currency forward contracts	0	0
Total liabilities measured at fair value	0	0
Fair value, Measurements, Recurring | Level 2
Assets:
Money market funds	0	0
U.S. government obligations	298,025	298,976
Commercial paper	69,810	89,865
Foreign currency forward contracts	3,730	227
Forward starting interest rate swaps	4,117	218
Total assets measured at fair value	375,682	389,286
Liabilities:
Foreign currency forward contracts	2,415	2,129
Total liabilities measured at fair value	2,415	2,129
Fair value, Measurements, Recurring | Level 3
Assets:
Money market funds	0	0
U.S. government obligations	0	0
Commercial paper	0	0
Foreign currency forward contracts	0	0
Forward starting interest rate swaps	0	0
Total assets measured at fair value	0	0
Liabilities:
Foreign currency forward contracts	0	0
Total liabilities measured at fair value	$ 0	$ 0

XML

- Condensed Consolidated Balance Sheet (Details) - Fair value, Measurements, Recurring - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Assets:
Total assets measured at fair value	$ 897,380	$ 900,641
Liabilities:
Total liabilities measured at fair value	2,415	2,129
Cash equivalents
Assets:
Cash equivalents	551,639	571,280
Short-term investments
Assets:
Short-term investments	278,743	279,133
Prepaid expenses and other
Assets:
Prepaid expenses and other	3,730	227
Long-term investments
Assets:
Long-term investments	59,151	49,783
Other long-term assets
Assets:
Other long-term assets	4,117	218
Accrued liabilities
Liabilities:
Accrued liabilities	2,415	2,129
Level 1
Assets:
Total assets measured at fair value	521,698	511,355
Liabilities:
Total liabilities measured at fair value	0	0
Level 1 | Cash equivalents
Assets:
Cash equivalents	521,698	511,355
Level 1 | Short-term investments
Assets:
Short-term investments	0	0
Level 1 | Prepaid expenses and other
Assets:
Prepaid expenses and other	0	0
Level 1 | Long-term investments
Assets:
Long-term investments	0	0
Level 1 | Other long-term assets
Assets:
Other long-term assets	0	0
Level 1 | Accrued liabilities
Liabilities:
Accrued liabilities	0	0
Level 2
Assets:
Total assets measured at fair value	375,682	389,286
Liabilities:
Total liabilities measured at fair value	2,415	2,129
Level 2 | Cash equivalents
Assets:
Cash equivalents	29,941	59,925
Level 2 | Short-term investments
Assets:
Short-term investments	278,743	279,133
Level 2 | Prepaid expenses and other
Assets:
Prepaid expenses and other	3,730	227
Level 2 | Long-term investments
Assets:
Long-term investments	59,151	49,783
Level 2 | Other long-term assets
Assets:
Other long-term assets	4,117	218
Level 2 | Accrued liabilities
Liabilities:
Accrued liabilities	2,415	2,129
Level 3
Assets:
Total assets measured at fair value	0	0
Liabilities:
Total liabilities measured at fair value	0	0
Level 3 | Cash equivalents
Assets:
Cash equivalents	0	0
Level 3 | Short-term investments
Assets:
Short-term investments	0	0
Level 3 | Prepaid expenses and other
Assets:
Prepaid expenses and other	0	0
Level 3 | Long-term investments
Assets:
Long-term investments	0	0
Level 3 | Other long-term assets
Assets:
Other long-term assets	0	0
Level 3 | Accrued liabilities
Liabilities:
Accrued liabilities	$ 0	$ 0

XML

Inventories (Details) - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Oct. 31, 2017
Inventories
Raw materials	$ 47,710		$ 52,898
Work-in-process	16,444		18,623
Finished goods	176,426		185,488
Deferred cost of goods sold	64,445		61,340
Inventories before provision	305,025		318,349
Provision for excess and obsolescence	(49,774)		(51,206)
Total inventories	255,251		$ 267,143
Provisions	$ 6,804	$ 5,431

XML

Accrued Liabilities and Other Short-Term Obligations (Details) - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017	Jan. 31, 2017	Oct. 31, 2016
Accrued liabilities
Compensation, payroll related tax and benefits	$ 68,526	$ 113,272
Warranty	42,526	42,456	$ 48,652	$ 52,324
Vacation	39,628	39,778
Capital lease obligations	3,934	3,772
Interest payable	4,867	3,612
Other	108,683	120,044
Total accrued liabilities and other short-term obligations	$ 268,164	$ 322,934

XML

Accrued Liabilities and Other Short-Term Obligations - Accrued Warranty (Details) - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance	$ 42,456	$ 52,324
Current Period Provisions	4,657	553
Settlements	(4,587)	(4,225)
Ending balance	$ 42,526	48,652
Adjustment on prior year provisions		$ (3,600)

XML

Derivative Instruments (Details) - USD ($) $ in Millions	3 Months Ended
	Jan. 31, 2018	Oct. 31, 2017
Foreign Currency Contracts | Designated as hedging instrument | Cash flow hedging
Derivative [Line Items]
Derivative asset, notional amount	$ 187.3	$ 86.1
Derivative maturity (in months)	12 months
Foreign Currency Contracts | Not designated as hedging instrument
Derivative [Line Items]
Derivative asset, notional amount	$ 82.7	83.4
Derivative maturity (in months)	12 months
Interest Rate Swap One | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022
Derivative [Line Items]
Interest rate swap fix	98.00%
Derivative, swaption interest rate	4.25%
Interest Rate Swap Two | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022
Derivative [Line Items]
Interest rate swap fix	82.00%
Derivative, swaption interest rate	4.25%
Interest Rate Swap Three | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022
Derivative [Line Items]
Interest rate swap fix	77.00%
Derivative, swaption interest rate	4.75%
Starting Interest Rate Swap | Designated as hedging instrument | Cash flow hedging | Secured debt | Term Loan 2022
Derivative [Line Items]
Derivative asset, notional amount	$ 388.6	$ 389.6

XML

Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income - beginning balance	$ 2,136,342
Accumulated other comprehensive income - ending balance	1,756,140
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income - beginning balance	(11,017)	$ (24,329)
Other comprehensive income (loss) before reclassifications	13,044	5,316
Amounts reclassified from AOCI	348	842
Accumulated other comprehensive income - ending balance	2,375	(18,171)
Unrealized gain/(loss) on marketable securities
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income - beginning balance	(451)	139
Other comprehensive income (loss) before reclassifications	(261)	(249)
Amounts reclassified from AOCI	0	0
Accumulated other comprehensive income - ending balance	(712)	(110)
Unrealized gain/(loss) on derivatives | Foreign Currency Contracts
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income - beginning balance	(1,386)	(1,091)
Other comprehensive income (loss) before reclassifications	1,624	1,031
Amounts reclassified from AOCI	(71)	394
Accumulated other comprehensive income - ending balance	167	334
Unrealized gain/(loss) on derivatives | Starting Interest Rate Swap
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income - beginning balance	218	(5,967)
Other comprehensive income (loss) before reclassifications	3,479	4,044
Amounts reclassified from AOCI	419	448
Accumulated other comprehensive income - ending balance	4,116	(1,475)
Cumulative foreign currency translation adjustment
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated other comprehensive income - beginning balance	(9,398)	(17,410)
Other comprehensive income (loss) before reclassifications	8,202	490
Amounts reclassified from AOCI	0	0
Accumulated other comprehensive income - ending balance	$ (1,196)	$ (16,920)

XML

Short-Term and Long-Term Debt (Details) - USD ($)	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Oct. 31, 2017
Secured debt | Term Loan 2022
Debt Instrument [Line Items]
Debt issuance costs, net	$ 2,923,000		$ 3,100,000
Amortization of debt issuance costs included in interest expense	200,000	$ 0
Convertible notes payable | Convertible senior notes due 2018 and 2020
Debt Instrument [Line Items]
Debt issuance costs, net	1,700,000		$ 2,100,000
Amortization of debt issuance costs included in interest expense	$ 400,000	$ 500,000

XML

Short-Term and Long-Term Debt - 2022 Term Loan Net Carry Value and Estimated Fair Value (Details) - Secured debt - Term Loan Payable due Jan 30, 2022 - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Debt Instrument [Line Items]
Carrying Value	$ 392,269	$ 392,972
Fair Value	$ 397,993

XML

Short-Term and Long-Term Debt - 2022 Term Loan Debt Components (Details) - Secured debt - Term Loan 2022 - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Debt Instrument [Line Items]
Principal Balance	$ 397,000
Unamortized Debt Discount	(1,808)
Deferred Debt Issuance Costs	(2,923)	$ (3,100)
Net Carrying Value	$ 392,269	$ 392,972

XML

Short-Term and Long-Term Debt - Outstanding Convertible Notes Payable Net Carry Value and Estimated Fair Value (Details) - Convertible notes payable - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Debt Instrument [Line Items]
Net Carrying Value	$ 545,085	$ 543,009
Fair Value	656,306
3.75% Convertible Senior Notes due October 15, 2018 (Original)
Debt Instrument [Line Items]
Net Carrying Value	61,125	61,071
Fair Value	71,778
3.75% Convertible Senior Notes due October 15, 2018 (New)
Debt Instrument [Line Items]
Net Carrying Value	287,627	287,221
Fair Value	338,247
4.0% Convertible Senior Notes due December 15, 2020
Debt Instrument [Line Items]
Net Carrying Value	196,333	$ 194,717
Fair Value	$ 246,281

XML

Short-Term and Long-Term Debt - Outstanding Convertible Notes Payable Debt Components (Details) $ in Thousands	3 Months Ended
	Jan. 31, 2018 USD ($)
3.75% Convertible Senior Notes due October 15, 2018 (Original)
Debt Instrument [Line Items]
Interest rate on convertible notes (as a percent)	3.75%
3.75% Convertible Senior Notes due October 15, 2018 (New)
Debt Instrument [Line Items]
Interest rate on convertible notes (as a percent)	3.75%
4.0% Convertible Senior Notes due December 15, 2020
Debt Instrument [Line Items]
Interest rate on convertible notes (as a percent)	4.00%
Convertible notes payable | 3.75% Convertible Senior Notes due October 15, 2018 (Original)
Debt Instrument [Line Items]
Principal Balance	$ 61,270
Unamortized Debt Discount	0
Deferred Debt Issuance Costs	(145)
Net Carrying Value	61,125
Equity component, Net carrying value	0
Convertible notes payable | 3.75% Convertible Senior Notes due October 15, 2018 (New)
Debt Instrument [Line Items]
Principal Balance	288,730
Unamortized Debt Discount	(423)
Deferred Debt Issuance Costs	(680)
Net Carrying Value	287,627
Equity component, Net carrying value	0
Convertible notes payable | 4.0% Convertible Senior Notes due December 15, 2020
Debt Instrument [Line Items]
Principal Balance	205,906
Unamortized Debt Discount	(8,692)
Deferred Debt Issuance Costs	(881)
Net Carrying Value	196,333
Equity component, Net carrying value	$ 43,131
Accretion rate of principal amount	1.85%

XML

Earnings Per Share Calculation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Numerator
Net income (loss)	$ (473,363)	$ 3,861
Denominator
Basic weighted average shares outstanding	143,922	140,682
Add: Shares underlying outstanding stock options and restricted stock units and issuable under employee stock purchase plan	0	1,502
Dilutive weighted average shares outstanding (in shares)	143,922	142,184
EPS
Basic EPS (in dollars per share)	$ (3.29)	$ 0.03
Diluted EPS (in dollars per share)	$ (3.29)	$ 0.03

XML

Earnings Per Share Calculation - Antidilutive Securities Excluded (Details) - $ / shares shares in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Oct. 31, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	16,341	33,673
Common stock average market price (in dollars per share)	$ 21.19
0.875% Convertible Senior Notes due June 15, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes (as a percent)			0.875%
3.75% Convertible Senior Notes due October 15, 2018 (Original)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes (as a percent)	3.75%
3.75% Convertible Senior Notes due October 15, 2018 (New)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes (as a percent)	3.75%
Shares of underlying Convertible Senior Notes due	14,300
Initial conversion price per share equivalent (in dollars per share)	$ 20.17
4.0% Convertible Senior Notes due December 15, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Interest rate on convertible notes (as a percent)	4.00%
Shares underlying stock options and restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	3,414	1,556
Convertible Senior Notes | 0.875% Convertible Senior Notes due June 15, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	0	5,564
Convertible Senior Notes | 3.75% Convertible Senior Notes due October 15, 2018 (Original)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	3,038	17,355
Convertible Senior Notes | 3.75% Convertible Senior Notes due October 15, 2018 (New)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	691	0
Convertible Senior Notes | 4.0% Convertible Senior Notes due December 15, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total excluded due to anti-dilutive effect (in shares)	9,198	9,198

XML

Stockholders' Equity (Details) - USD ($)	Jan. 31, 2018	Dec. 07, 2017	Oct. 31, 2017
Class of Stock [Line Items]
Deferred tax asset, net	$ 739,446,000		$ 1,155,104,000
Effect of adoption of new accounting standards			62,123,000
Stock repurchase program authorized amount		$ 300,000,000
ASU 2016-09, Excess tax benefit component
Class of Stock [Line Items]
Deferred tax asset, net			62,100,000
Retained earnings
Class of Stock [Line Items]
Effect of adoption of new accounting standards			61,291,000
Retained earnings | ASU 2016-09, Excess tax benefit component
Class of Stock [Line Items]
Effect of adoption of new accounting standards			62,100,000
Retained earnings | ASU 2016-09, Forfeiture rate component
Class of Stock [Line Items]
Effect of adoption of new accounting standards			$ 800,000

XML

Stockholders' Equity - Summary of the Stock Repurchase Program (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Jan. 31, 2018 USD ($) $ / shares shares
Shares Repurchased
Cumulative balance at October 31, 2017 (in shares) | shares	0
Repurchase of common stock under the stock repurchase program (in shares) | shares	262,487
Cumulative balance at January 31, 2018 (in shares) | shares	262,487
Weighted-Average Price per Share
Cumulative balance at October 31, 2017 (in USD per share) | $ / shares	$ 0.00
Repurchase of common stock under the stock repurchase program (in USD per share) | $ / shares	21.92
Cumulative balance at January 31, 2018 (in USD per share) | $ / shares	$ 21.92
Amount Repurchased (in thousands)
Cumulative balance at October 31, 2017 | $	$ 0
Repurchase of common stock under the stock repurchase program | $	5,755
Cumulative balance at January 31, 2018 | $	$ 5,755

XML

Share-Based Compensation Expense - Expense in Period (Details) - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Share-based compensation expense
Share-based compensation expense capitalized in inventory, net	$ 39	$ 101
Total share-based compensation	12,393	12,825
Cost of Sales
Share-based compensation expense
Share-based compensation expense	1,297	1,189
Product costs
Share-based compensation expense
Share-based compensation expense	672	561
Service costs
Share-based compensation expense
Share-based compensation expense	625	628
Operating Expense
Share-based compensation expense
Share-based compensation expense	11,057	11,535
Research and development
Share-based compensation expense
Share-based compensation expense	3,255	3,209
Sales and marketing
Share-based compensation expense
Share-based compensation expense	3,328	2,873
General and administrative
Share-based compensation expense
Share-based compensation expense	$ 4,474	$ 5,453

XML

Share-Based Compensation Expense (Details) $ in Millions	3 Months Ended
	Jan. 31, 2018 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation	$ 100.1
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation	$ 0.1
Weighted-average period for recognition of share-based compensation (in years)	9 months 18 days
Restricted stock units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized share-based compensation	$ 100.0
Weighted-average period for recognition of share-based compensation (in years)	1 year 8 months 12 days

XML

Segments and Entity-Wide Disclosures (Details) - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Oct. 31, 2017
Segment Reporting Information [Line Items]
Equipment, building, furniture and fixtures, net	$ 318,835		$ 308,465
Maintenance spares, net	43,700
Net revenue	646,135	$ 621,497
Networking Platforms
Segment Reporting Information [Line Items]
Other intangible assets, net	36,900
Net revenue	496,033	489,944
Software and Software-Related Services
Segment Reporting Information [Line Items]
Other intangible assets, net	59,600
Net revenue	53,487	39,380
UNITED STATES
Segment Reporting Information [Line Items]
Equipment, building, furniture and fixtures, net	86,836		$ 90,482
Net revenue	$ 383,400	$ 379,700

XML

Segments and Entity-Wide Disclosures - Revenue, Profit (Loss) and Net Income (Loss) Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Revenue:
Revenue	$ 646,135	$ 621,497
Segment profit:
Operating income (loss)	16,736	19,104
Less: Non-performance operating expenses
Selling and marketing	88,515	85,002
General and administrative	38,406	35,864
Amortization of intangible assets	3,623	14,551
Significant asset impairments and restructuring costs	5,961	2,395
Add: Other non-performance financial items
Interest expense and other income (loss), net	(12,159)	(14,833)
Less: Provision for income taxes	477,940	410
Net income (loss)	(473,363)	3,861
Networking Platforms
Revenue:
Revenue	496,033	489,944
Networking Platforms | Converged Packet Optical
Revenue:
Revenue	427,401	417,750
Networking Platforms | Packet Networking
Revenue:
Revenue	68,632	72,194
Software and Software-Related Services
Revenue:
Revenue	53,487	39,380
Software and Software-Related Services | Software Platforms
Revenue:
Revenue	29,576	17,049
Software and Software-Related Services | Software-Related Services
Revenue:
Revenue	23,911	22,331
Global Services
Revenue:
Revenue	96,615	92,173
Global Services | Maintenance Support and Training
Revenue:
Revenue	55,958	54,990
Global Services | Installation and Deployment
Revenue:
Revenue	30,016	27,919
Global Services | Consulting and Network Design
Revenue:
Revenue	10,641	9,264
Operating Segments
Segment profit:
Operating income (loss)	153,241	156,916
Operating Segments | Networking Platforms
Segment profit:
Operating income (loss)	88,569	113,747
Operating Segments | Software and Software-Related Services
Segment profit:
Operating income (loss)	23,635	7,700
Operating Segments | Global Services
Segment profit:
Operating income (loss)	$ 41,037	$ 35,469

XML

Segments and Entity-Wide Disclosures - Geographic Distribution of Equipment, Building, Furniture and Fixtures (Details) - USD ($) $ in Thousands	Jan. 31, 2018	Oct. 31, 2017
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, building, furniture and fixtures, net	$ 318,835	$ 308,465
Canada
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, building, furniture and fixtures, net	212,142	203,491
United States
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, building, furniture and fixtures, net	86,836	90,482
Other International
Ciena's geographic distribution of equipment, furniture and fixtures
Equipment, building, furniture and fixtures, net	$ 19,857	$ 14,492

XML

Segments and Entity-Wide Disclosures - Revenue by Major Customers (Details) - Customer concentration risk - Sales revenue, net - USD ($) $ in Thousands	3 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Revenue, Major Customer [Line Items]
Revenue	$ 159,090	$ 169,526
AT&T
Revenue, Major Customer [Line Items]
Revenue	90,645	96,437
Verizon
Revenue, Major Customer [Line Items]
Revenue	$ 68,445	$ 73,089

XML

Commitments and Contingencies (Details)	3 Months Ended
	Jan. 31, 2018
PHILIPPINES | Customer concentration risk | Sales Revenue, Net
Loss Contingencies [Line Items]
Concentration risk, percentage	1.50%

XML

Subsequent Event (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Mar. 05, 2018	Jan. 31, 2018
Subsequent Event [Line Items]
Stock repurchases (in shares)		262,487
Stock repurchases		$ 5,755
Average price of shares repurchased (in USD per share)		$ 21.92
Subsequent event
Subsequent Event [Line Items]
Stock repurchases (in shares)	611,514
Stock repurchases	$ 13,800
Average price of shares repurchased (in USD per share)	$ 22.52
Stock Repurchase Program, amount remaining	$ 280,500