SEGMENTS AND ENTITY-WIDE DISCLOSURES

Segment Reporting

Ciena manages its business, measures its performance and allocates its resources based on 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. As of the first quarter of fiscal 2018, sales of Optical Transport products are also reflected within the Converged Packet Optical product line for all periods presented.


◦	Packet Networking — includes the 3000 family of service delivery 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 software platforms and software-related services.

Software platforms includes:

◦

Ciena’s Blue Planet Intelligent Automation Platform, which is a comprehensive, open software suite that allows customers to use enhanced knowledge about their network to drive adaptive optimization of their services and operations. Ciena’s Blue Planet Intelligent Automation Platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), analytics, network health predictor (NHP), route optimization and assurance (ROA) and Ciena’s SDN Multilayer Controller and virtual wide area network (V-WAN) application. Ciena acquired the NHP and ROA software solutions as a part of its acquisition of Packet Design.

◦

Ciena’s management software, which provides analytics, data, and planning tools to assist customers in managing Ciena’s Networking Platforms products in their networks. Ciena’s management software consists of Blue Planet Manage, Control and Plan (MCP) domain controller solution, 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 MCP software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other management software solutions.

Software-related services includes sales of subscription, installation, support, and consulting services related to Ciena’s software platforms.

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 July 31, 2018, equipment, building, furniture and fixtures, net totaled $295.9 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 July 31, 2018, $32.1 million of Ciena’s intangible assets, net were assigned to asset groups within Ciena’s Networking Platforms segment and $76.2 million of Ciena’s intangible assets, net were assigned to asset groups within Ciena’s Software and Software-Related Services segment. As of July 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 July 31,				Nine Months Ended July 31,
	2018		2017		2018		2017
Revenue:
Networking Platforms
Converged Packet Optical	$	592,892	$	510,226	$	1,548,189	$	1,433,137
Packet Networking	84,559		82,121		216,977		220,641
Total Networking Platforms	677,451		592,347		1,765,166		1,653,778

Software and Software-Related Services
Software Platforms	14,307		18,395		56,427		48,587
Software-Related Services	26,876		23,856		76,988		70,760
Total Software and Software-Related Services	41,183		42,251		133,415		119,347

Global Services
Maintenance Support and Training	60,897		57,902		177,759		171,133
Installation and Deployment	31,262		27,397		89,487		84,011
Consulting and Network Design	8,024		8,822		29,103		28,969
Total Global Services	100,183		94,121		296,349		284,113

Consolidated revenue	$	818,817	$	728,719	$	2,194,930	$	2,057,238

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; significant asset impairments and restructuring costs; amortization of intangible assets; acquisition and integration costs; interest and other income (loss), net; interest expense; and provision 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 July 31,						Nine Months Ended July 31,
	2018			2017			2018			2017
Segment profit:
Networking Platforms	$	181,603		$	159,649		$	396,995		$	423,859
Software and Software-Related Services	9,305			11,133			41,216			23,384
Global Services	39,502			39,565			121,823			116,637
Total segment profit	230,410			210,347			560,034			563,880
Less: Non-performance operating expenses
Selling and marketing	95,395			86,739			281,269			260,292
General and administrative	38,212			35,569			115,594			106,423
Significant asset impairments and restructuring costs	6,359			2,203			16,679			8,874
Amortization of intangible assets	3,837			3,837			11,083			29,368
Acquisition and integration costs	1,333			—			1,333			—
Add: Other non-performance financial items
Interest expense and other income (loss), net	(15,154		)	(14,263		)	(39,048		)	(45,322		)
Less: Provision for income taxes	19,280			7,726			503,695			11,704
Consolidated net income (loss)	$	50,840		$	60,010		$	(408,667	)	$	101,897

Entity-Wide Reporting

Ciena’s revenue includes $469.2 million and $438.1 million of United States revenue for the third quarter of fiscal 2018 and 2017, respectively. Ciena’s revenue also includes $83.6 million of India revenue for the third quarter of fiscal 2018. For the nine months ended July 31, 2018 and 2017, United States revenue was $1,245.3 million and $1,209.8 million, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.

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):



	July 31, 2018		October 31, 2017
Canada	$	197,057	$	203,491
United States	79,243		90,482
Other International	19,563		14,492
Total	$	295,863	$	308,465

For the periods below, Verizon, AT&T and a Web-scale provider were the only customers that accounted for at least 10% of Ciena’s revenue as follows (in thousands):



	Quarter Ended July 31,				Nine Months Ended July 31,
	2018		2017		2018		2017
Verizon	$	97,103	$	82,918	$	221,475	$	206,272
AT&T	87,389		120,931		263,453		324,900
Web-scale provider	86,364		n/a		n/a		n/a
Total	$	270,856	$	203,849	$	484,928	$	531,172



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

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