INVENTORIES

12 Months Ended

Oct. 28, 2023

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


	October 28, 2023		October 29, 2022
Raw materials	$	664,797	$	664,916
Work-in-process	55,242		18,232
Finished goods	314,168		258,584
Deferred cost of goods sold	66,634		41,084
Gross inventories	1,100,841		982,816
Reserve for excess and obsolescence	(50,003)		(36,086)
Inventories, net	$	1,050,838	$	946,730

Ciena has been expanding its manufacturing capacity and accumulating raw materials inventory of components that are available, in some cases with expanded lead times, in an effort to prepare Ciena to produce finished goods more quickly when supply constraints ease for certain common components, including integrated circuit components, for which delivery continues to be delayed. Raw materials inventory is related to the steps Ciena has taken to mitigate the impact of supply chain constraints on its business and customers in recent prior periods and the global market shortage of semiconductor parts. The increase in finished goods inventories resulted primarily from planned fulfillment of customer advance orders for which some deliveries have been rescheduled outside of fiscal 2023.

Ciena makes estimates about future customer demand for its products when establishing the appropriate reserve for excess and obsolete inventory. For fiscal 2023, future demand was calculated using both customer backlog and future forecasted sales. For fiscal 2022, future demand was calculated primarily based on customer backlog. Generally, Ciena’s customers may cancel or change their orders with limited advance notice, or they may decide not to accept its products and services, although instances of both cancellation and non-acceptance are rare. 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, which are affected by changes in Ciena’s strategic direction, discontinuance of a product or introduction of newer versions of products, declines in the sales of or forecasted demand for certain products,

and general market conditions. During fiscal 2023, fiscal 2022 and fiscal 2021, Ciena recorded a provision for excess and obsolescence of $29.5 million, $16.2 million, and $17.9 million, respectively, 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 the sale of previously reserved items and disposal activities.

The following table summarizes the activity in Ciena’s reserve for excess and obsolete inventory for the fiscal years indicated (in thousands):


Year Ended	Beginning Balance		Provisions		Disposals		Ending Balance
October 30, 2021	$	39,637	$	17,850	$	20,528	$	36,959
October 29, 2022	$	36,959	$	16,184	$	17,057	$	36,086
October 28, 2023	$	36,086	$	29,464	$	15,547	$	50,003