Fair Value Measurements

9 Months Ended

Jul. 31, 2011

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

(6) FAIR VALUE MEASUREMENTS

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

	July 31, 2011
	Level 1		Level 2		Level 3		Total
Assets:
U.S. government obligations	$	50,227	$	—	$	—	$	50,227
Foreign currency forward contracts		—		137		—		137
Embedded redemption feature		—		—		7,600		7,600
Total assets measured at fair value	$	50,227	$	137	$	7,600	$	57,964

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

	July 31, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Prepaid expenses and other	$	—	$	137	$	—	$	137
Long-term investments		50,227		—		—		50,227
Other long-term assets		—		—		7,600		7,600
Total assets measured at fair value	$	50,227	$	137	$	7,600	$	57,964

     Ciena’s Level 3 assets included in other long-term assets reflect an embedded redemption feature contained within Ciena’s 4.0% convertible senior notes. See Note 14 below. The embedded redemption feature is bifurcated from Ciena’s 4.0% convertible senior notes using the “with-and-without” approach. As such, the total value of the embedded redemption feature is calculated as the difference between the value of the 4.0% convertible senior notes (the “Hybrid Instrument”) and the value of an identical instrument without the embedded redemption feature (the “Host Instrument”). Both the Host Instrument and the Hybrid Instrument are valued using a modified binomial model. The modified binomial model utilizes a risk free interest rate, an implied volatility of Ciena’s stock, the recovery rates of bonds and the implied default intensity of the 4.0% convertible senior notes.

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

	Level 3
Balance at October 31, 2010	$	34,415
Issuances		—
Settlements		(30,195	)
Changes in unrealized gain (loss)		3,380
Transfers into Level 3		—
Transfers out of Level 3		—
Balance at July 31, 2011	$	7,600