Delivers 16% year-over-year revenue growth and annual GAAP gross margin of 50%

LINTHICUM, Md.--(BUSINESS WIRE)--December 11, 2008--Ciena^® Corporation (NASDAQ: CIEN), the network specialist, today announced unaudited results for its fiscal fourth quarter and year ended October 31, 2008. Revenue for the year totaled $902.4 million, representing an increase of 16% over revenue of $779.8 million for fiscal 2007. For the fiscal fourth quarter 2008, Ciena reported revenue of $179.7 million, representing a 29% sequential decrease from fiscal third quarter 2008 revenue of $253.2 million, and a decrease of 17% over the same period a year ago when Ciena reported revenue of $216.2 million.

On the basis of generally accepted accounting principles (GAAP), Ciena’s net income for fiscal year 2008, was $38.9 million, or $0.42 per diluted common share. This compares to a GAAP net income of $82.8 million, or $0.87 per diluted common share, for fiscal year 2007. For the fiscal fourth quarter ended October 31, 2008, Ciena’s reported GAAP net loss was $(25.4) million, or $(0.28) per common share. This compares to fiscal third quarter 2008 GAAP net income of $11.7 million, or $0.12 per diluted common share, and a reported GAAP net income of $30.4 million, or $0.30 per diluted common share, for the same period a year ago.

Ciena’s adjusted (non-GAAP) net income for fiscal year 2008 was $122.5 million, or $1.17 per diluted common share. This compares to an adjusted (non-GAAP) net income of $134.5 million, or $1.39 per diluted common share, for fiscal year 2007. For the fiscal fourth quarter ended October 31, 2008, Ciena’s reported adjusted (non-GAAP) net loss was $(9.2) million, or $(0.10) per common share. This compares to fiscal third quarter 2008 adjusted (non-GAAP) net income of $39.8 million, or $0.37 per diluted common share, and adjusted (non-GAAP) net income of $50.3 million, or $0.48 per diluted common share, for the same period a year ago. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is provided in the table in Appendix A.

“While our fiscal fourth quarter results clearly demonstrate the effects of a challenging macroeconomic and industry environment, Ciena made meaningful strategic progress during the year and delivered a strong fiscal 2008,” said Gary Smith, Ciena’s president and CEO. “In addition to 16% annual revenue growth, we also improved our gross margin over fiscal 2007; invested significantly in our business while maintaining our as-adjusted operating margin; and, generated $117.6 million in cash from operations during the year.”

“Longer term, we believe that underlying capacity demands and our customers’ business need to transition to more efficient networks remain fundamental demand drivers for our business,” said Smith. “Our short-term visibility is limited, however, as the rapidly unfolding macroeconomic climate causes increased capex scrutiny among our customers.”

“While we expect the current, challenging environment will persist through 2009, our goal and our focus is to manage our business to be both profitable on an as-adjusted basis and cash-flow positive for the year,” said Smith. “At this time, our best estimate is that our fiscal first quarter 2009 revenue will be in a range of $170 million to $185 million.”

Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2008 and Year-End Results

Ciena will host a discussion of its unaudited fiscal fourth quarter 2008 and year end results with investors and financial analysts today, Thursday, December 11, 2008 at 8:30 a.m. (Eastern). The live broadcast of the discussion will be available via Ciena’s homepage at www.ciena.com. An archived version of the discussion will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena’s website at: http://www.ciena.com/investors.

Forward-looking statements. This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties. These statements are based on information available to the Company as of the date hereof; and Ciena's actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Report on Form 10-Q, which Ciena filed with the Securities and Exchange Commission on September 5, 2008. Forward-looking statements include statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include: Longer term, we believe that underlying capacity demands and our customers’ business need to transition to more efficient networks remain fundamental demand drivers for our business; while we expect the current, challenging environment will persist through 2009, our goal and our focus is to manage our business to be both profitable on an as-adjusted basis and cash-flow positive for the year; and at this time our best estimate is that our fiscal first quarter 2009 revenue will be in a range of $170 million to $185 million. Ciena assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise.

Non-GAAP Presentation of Annual and Quarterly Results. This release includes non-GAAP measures of Ciena’s gross profit, operating expense, income from operations, net income and net income per share. In evaluating the operating performance of Ciena’s business, management excludes certain charges and credits that are required by GAAP. These items, share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena’s control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena’s GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena’s non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena’s results of operations in conjunction with our corresponding GAAP results. For a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release, see Appendix A.

Ciena specializes in the transition to service-driven networks. We provide flexible platforms, intelligent software and professional services to help our customers use their networks to fundamentally change the way they compete. With a growing global presence, Ciena leverages its heritage of practical innovation to deliver maximum performance and economic value in communications networks worldwide. We routinely post recent news, financial results and other important announcements and information about Ciena on our website at www.ciena.com.


CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

	Quarter Ended October 31,						Year Ended October 31,
	2007			2008			2007			2008

Revenue:
Products	$	193,652		$	149,783		$	695,289		$	791,415
Services		22,538			29,871			84,480			111,033
Total revenue		216,190			179,654			779,769			902,448
Costs:
Products		87,185			75,857			337,866			371,238
Services		19,859			22,666			79,634			80,283
Total cost of goods sold		107,044			98,523			417,500			451,521
Gross profit		109,146			81,131			362,269			450,927

Operating Expenses
Research and development		34,130			47,142			127,296			175,023
Selling and marketing		32,655			40,379			118,015			152,018
General and administrative		13,686			14,603			50,248			68,639
Amortization of intangible assets		6,465			8,363			25,350			32,264
Restructuring cost (recoveries)		(39	)		1,110			(2,435	)		1,110
Gain on lease settlement		(4,871	)		-			(4,871	)		-
Total operating expenses		82,026			111,597			313,603			429,054
Income (loss) from operations		27,120			(30,466	)		48,666			21,873
Interest and other income (expense), net		25,277			3,851			76,483			36,762
Interest expense		(7,769	)		(1,853	)		(26,996	)		(12,927	)
Realized (loss) gain on marketable debt investments		(13,013	)		13			(13,013	)		(5,101	)
Gain on early extinguishment of debt		-			932			-			932
Gain on equity investments, net		-			-			592			-
Income (loss) before income taxes		31,615			(27,523	)		85,732			41,539
Provision (benefit) for income taxes		1,205			(2,127	)		2,944			2,645
Net income (loss)	$	30,410		$	(25,396	)	$	82,788		$	38,894

Basic net income (loss) per common share	$	0.35		$	(0.28	)	$	0.97		$	0.44

Diluted net income (loss) per common share and dilutive potential common share	$	0.30		$	(0.28	)	$	0.87		$	0.42

Weighted average basic common shares outstanding		86,241			90,413			85,525			89,146

Weighted average basic common and dilutive potential common shares outstanding		108,812			90,413			99,604			110,605


CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

ASSETS
	October 31,
Current assets:	2007			2008
Cash and cash equivalents	$	892,061		$	550,669
Short-term investments		822,185			366,336
Accounts receivable, net		104,078			138,441
Inventories		102,618			93,452
Prepaid expenses and other		47,817			35,888
Total current assets		1,968,759			1,184,786
Long-term investments		33,946			156,171
Equipment, furniture and fixtures, net		46,671			59,967
Goodwill		232,015			455,673
Other intangible assets, net		67,144			92,249
Other long-term assets		67,738			75,748
Total assets	$	2,416,273		$	2,024,594

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	55,389		$	44,761
Accrued liabilities		90,922			96,143
Restructuring liabilities		1,026			1,668
Income taxes payable		7,768			-
Deferred revenue		33,025			36,767
Convertible notes payable		542,262			-
Total current liabilities		730,392			179,339
Long-term deferred revenue		30,615			37,660
Long-term restructuring liabilities		3,662			2,557
Other long-term obligations		1,450			8,089
Convertible notes payable		800,000			798,000
Total liabilities		1,566,119			1,025,645
Commitments and contingencies
Stockholders' equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding		-			-
Common stock – par value $0.01; 140,000,000 and 290,000,000 shares authorized; 86,752,069 and 90,470,803 shares issued and outstanding		868			905
Additional paid-in capital		5,519,741			5,629,498
Changes in unrealized gains on investments, net of income taxes		350			(1,129	)
Translation adjustment		(1,593	)		(146	)
Accumulated deficit		(4,669,212	)		(4,630,179	)
Total stockholders' equity		850,154			998,949
Total liabilities and stockholders' equity	$	2,416,273		$	2,024,594


CIENA CORPORATION
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	October 31,
	2007			2008
Cash flows from operating activities:
Net income	$	82,788		$	38,894
Adjustments to reconcile net income to net cash provided by operating activities:
Early extinguishment of debt		-			(932	)
Amortization of discount on marketable debt securities		(14,191	)		(2,878	)
Loss from marketable debt securities		13,013			5,101
Depreciation and amortization of leasehold improvements		12,833			18,599
Share-based compensation		19,572			31,428
Amortization of intangibles		29,220			37,956
Deferred tax provision		-			1,640
Provision for inventory excess and obsolescence		12,180			18,325
Provision for warranty		12,743			15,336
Other		2,544			5,243
Changes in assets and liabilities, net of effect of acquisition:
Accounts receivable		3,094			(32,471	)
Inventories		(8,713	)		3,713
Prepaid expenses and other		(20,568	)		1,649
Accounts payable, accruals and other obligations		(60,524	)		(23,945	)
Income taxes payable		1,787			(7,655	)
Deferred revenue		22,964			7,616
Net cash provided by operating activities		108,742			117,619
Cash flows from investing activities:
Payments for equipment, furniture, fixtures and intellectual property		(32,105	)		(29,998	)
Change in restricted cash		(13,277	)		1,340
Purchase of available for sale securities		(864,012	)		(571,511	)
Proceeds from maturities of available for sale securities		989,705			901,433
Minority equity investments, net		(181	)		-
Acquisition of business, net of cash acquired		-			(210,016	)
Net cash provided by investing activities		80,130			91,248
Cash flows from financing activities:
Proceeds from issuance of convertible notes payable		500,000			-
Repurchase of 3.75% convertible notes payable		-			(542,262	)
Repurchase of 0.25% convertible notes payable		-			(1,034	)
Debt issuance costs		(11,750	)		-
Purchase of call spread option		(42,500	)		-
Repayment of indebtedness of acquired business		-			(12,363	)
Excess tax benefit from employee stock option plans		-			318
Proceeds from issuance of common stock		36,835			5,776
Net cash provided by (used in) financing activities		482,585			(549,565	)
Effect of exchange rate changes on cash and cash equivalents		440			(694	)
Net increase (decrease) in cash and cash equivalents		671,897			(341,392	)
Cash and cash equivalents at beginning of period		220,164			892,061
Cash and cash equivalents at end of period	$	892,061		$	550,669
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest expense	$	21,504		$	15,339
Income taxes	$	1,157		$	3,120
Non-cash investing and financing activities
Purchase of equipment in accounts payable	$	3,062		$	2,316
Value of common stock issued in acquisition	$	-		$	62,359
Fair value of vested options assumed in acquisition	$	-		$	9,912


APPENDIX A - Reconciliation of Adjusted (Non-GAAP) Quarterly Measures

	Quarter Ended
	October 31,			July 31,			October 31,
	2007			2008			2008

Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit	$	109,146		$	125,631		$	81,131
Share-based compensation-product		543			1,042			604
Share-based compensation-services		217			404			370
Amortization of intangible assets		-			1,139			683
Fair value adjustment of acquired inventory		-			4,278			-
Total adjustments related to gross profit		760			6,863			1,657
Adjusted (non-GAAP) gross profit	$	109,906		$	132,494		$	82,788
Adjusted (non-GAAP) gross profit percentage		51	%		52	%		46	%

Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense	$	82,026		$	110,678		$	111,597
Stock compensation research and development		836			2,198			1,603
Stock compensation sales and marketing		1,920			2,930			2,512
Stock compensation general and administrative		1,824			2,343			1,859
Amortization of intangible assets		6,465			8,671			8,363
Restructuring cost (recoveries)		(39	)		-			1,110
Gain on lease settlements		(4,871	)		-			-
Total adjustments related to operating expense		6,135			16,142			15,447
Adjusted (non-GAAP) operating expense	$	75,891		$	94,536		$	96,150

Income (Loss) from Operations Reconciliation (GAAP/non-GAAP)
GAAP income (loss) from operations	$	27,120		$	14,953		$	(30,466	)
Total adjustments related to gross profit		760			6,863			1,657
Total adjustments related to operating expense		6,135			16,142			15,447
Adjusted (non-GAAP) income (loss) from operations	$	34,015		$	37,958		$	(13,362	)
Adjusted (non-GAAP) operating margin percentage		16	%		15	%		(7	%)

Net Income (Loss) Reconciliation (GAAP/non-GAAP)
GAAP net (loss) income	$	30,410		$	11,723		$	(25,396	)
Total adjustments related to gross profit		760			6,863			1,657
Total adjustments related to operating expense		6,135			16,142			15,447
Realized loss (gain) on marketable debt investments, net		13,013		$	5,114			(13	)
Gain on early extinguishment of debt		-			-			(932	)
Adjusted (non-GAAP) net income (loss)	$	50,318		$	39,842			(9,237	)

Weighted average basic common shares outstanding		86,241			90,216			90,413
Weighted average basic common and dilutive potential common shares outstanding		108,812			111,681			90,413

Net Income (Loss) per Common Share (GAAP/non-GAAP)
GAAP diluted net income (loss) per common share¹	$	0.30		$	0.12		$	(0.28	)
Adjusted (non-GAAP) diluted net income (loss) per common share¹	$	0.48		$	0.37		$	(0.10	)

¹Note that calculating GAAP and adjusted (non-GAAP) diluted earnings per common share requires adding to net income interest expense of approximately $2.0 and $1.9 million (associated with Ciena’s 0.25% and 0.875% convertible senior notes) in the fiscal fourth quarter of 2007 and fiscal third quarter of 2008 respectively.


APPENDIX A - Reconciliation of Adjusted (Non-GAAP) Annual Measures

	Year Ended
	October 31,			October 31,
	2007			2008

Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit	$	362,269		$	450,927
Share-based compensation-product		1,257			2,953
Share-based compensation-services		920			1,412
Amortization of intangible assets		-			1,822
Fair value adjustment of acquired inventory		-			5,344
Total adjustments related to gross profit		2,177			11,531
Adjusted (non-GAAP) gross profit	$	364,446		$	462,458
Adjusted (non-GAAP) gross profit percentage		47	%		51	%

Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense	$	313,603		$	429,054
Stock compensation research and development		3,649			7,264
Stock compensation sales and marketing		6,724			10,928
Stock compensation general and administrative		6,440			8,644
Amortization of intangible assets		25,350			32,264
Litigation settlement		2,250			7,700
Restructuring cost (recoveries)		(2,435	)		1,110
Gain on lease settlements		(4,871	)		-
Total adjustments related to operating expense		37,107			67,910
Adjusted (non-GAAP) operating expense	$	276,496		$	361,144

Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations	$	48,666		$	21,873
Total adjustments related to gross profit		2,177			11,531
Total adjustments related to operating expense		37,107			67,910
Adjusted (non-GAAP) income from operations	$	87,950		$	101,314
Adjusted (non-GAAP) operating margin percentage		11	%		11	%

Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income	$	82,788		$	38,894
Total adjustments related to gross profit		2,177			11,531
Total adjustments related to operating expense		37,107			67,910
Realized loss on marketable debt investments, net		13,013			5,101
Gain on early extinguishment of debt		-			(932	)
Gain on equity investments, net		(592	)		-
Adjusted (non-GAAP) net income	$	134,493		$	122,504

Weighted average basic common shares outstanding		85,525			89,146
Weighted average basic common and dilutive potential common shares outstanding		99,604			110,605

Net Income per Common Share (GAAP/non-GAAP)
GAAP diluted net income per common share²	$	0.87		$	0.42
Adjusted (non-GAAP) diluted net income per common share²	$	1.39		$	1.17

²Note that calculating GAAP and adjusted (non-GAAP) diluted earnings per common share requires adding to net income interest expense of approximately $4.1 million and $7.4 million (associated with Ciena’s 0.25% and 0.875% convertible senior notes) in 2007 and 2008 respectively.

The adjusted (non-GAAP) measures above and their reconciliation to Ciena’s GAAP results for the periods presented reflect adjustments relating to the following items:

CONTACT:
Ciena Corporation
Press Contact:
Nicole Anderson, 410-694–5786
pr@ciena.com
or
Investor Contact:
Marie Downing, 888-243-6223
ir@ciena.com