<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM..................TO.........................
COMMISSION FILE NUMBER: 0-21969
CIENA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 23-2725311
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1201 WINTERSON ROAD, LINTHICUM, MD 21090
(Address of Principal Executive Offices) (Zip Code)
(410) 865-8500
(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 (X) NO ( )
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 FEBRUARY 10, 2000
- ---------------------------- ---------------------------------
Common stock. $.01 par value 139,959,159
Page 1 of 20 pages
<PAGE> 2
CIENA CORPORATION
INDEX
FORM 10-Q
<TABLE>
<CAPTION>
PAGE NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Statements of Operations
Quarters ended January 31, 1999
and January 31, 2000 3
Consolidated Balance Sheets
October 31, 1999 and January 31, 2000 4
Consolidated Statements of Cash Flows
Quarters ended January 31, 1999 and
January 31, 2000 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended January 31,
-------------------------------
1999 2000
--------------- -------------
<S> <C> <C>
Revenue $ 100,417 $ 152,213
Cost of goods sold 65,778 87,003
--------------- --------------
Gross profit 34,639 65,210
--------------- --------------
Operating expenses:
Research and development 22,218 29,742
Selling and marketing 13,608 18,122
General and administrative 5,036 6,871
--------------- --------------
Total operating expenses 40,862 54,735
--------------- --------------
Income (loss) from operations (6,223) 10,475
Interest and other income (expense), net 3,396 3,046
Interest expense (95) (96)
--------------- --------------
Income (loss) before income taxes (2,922) 13,425
Provision (benefit) for income taxes (1,041) 4,363
--------------- --------------
Net income (loss) $ (1,881) $ 9,062
=============== ==============
Basic net income (loss) per common share $ (0.01) $ 0.07
=============== ==============
Diluted net income (loss) per common share and dilutive
potential common share $ (0.01) $ 0.06
=============== ==============
Weighted average basic common shares outstanding 131,202 138,091
=============== ==============
Weighted average basic common and dilutive potential
common shares outstanding 131,202 147,903
=============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
October 31, January 31,
1999 2000
-------------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 143,440 $ 148,329
Marketable debt securities 118,956 110,208
Accounts receivable, net 144,348 166,244
Inventories, net 79,608 82,609
Deferred income taxes 25,385 26,018
Prepaid expenses and other 21,262 25,070
-------------- ------------
Total current assets 532,999 558,478
Equipment, furniture and fixtures, net 125,252 129,259
Goodwill and other intangible assets, net 12,635 11,726
Other assets 6,949 7,695
-------------- ------------
Total assets $ 677,835 $ 707,158
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,399 $ 38,431
Accrued liabilities 58,486 61,028
Income taxes payable 8,697 -
Deferred revenue 2,954 2,102
Other current obligations 992 835
-------------- ------------
Total current liabilities 105,528 102,396
Deferred income taxes 36,953 36,953
Other long-term obligations 4,881 5,084
-------------- ------------
Total liabilities $ 147,362 $ 144,433
-------------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $.01; 20,000,000 shares authorized; zero shares
issued and outstanding - -
Common stock - par value $.01; 360,000,000 shares authorized;
138,187,356 and 139,809,956 shares issued and outstanding 1,382 1,398
Additional paid-in capital 360,082 383,149
Notes receivable from stockholders (210) (141)
Accumulated other comprehensive income (40) (2)
Retained earnings 169,259 178,321
-------------- ------------
Total stockholders' equity 530,473 562,725
-------------- ------------
Total liabilities and stockholders' equity $ 677,835 $ 707,158
============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
CIENA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended January 31,
---------------------------------
1999 2000
-------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (1,881) $ 9,062
Adjustments to reconcile net income to net cash
provided by operating activities:
Non-cash charges from equity transactions 10 10
Amortization of premiums on marketable debt securities 42 3
Effect of translation adjustment (1) 38
Depreciation and amortization 11,557 13,899
Provision for doubtful accounts - 250
Provision for inventory excess and obsolescence 1,533 4,476
Provision for warranty and other contractual obligations 2,218 2,290
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 5,215 (22,146)
Increase in prepaid expenses and other (5,240) (4,557)
Decrease (increase) in inventories 10,804 (7,477)
Decrease (increase) in deferred income tax asset 3,776 (633)
Decrease in prepaid income taxes 10,345 -
Decrease in other assets 63 -
Increase in accounts payable and accruals 6,196 4,284
Decrease in income taxes payable - (8,697)
Increase in deferred income tax liability 189 -
Decrease in deferred revenue and other obligations (299) (852)
-------------- -------------
Net cash provided (used) by operating activities 44,527 (10,050)
-------------- -------------
Cash flows from investing activities:
Additions to equipment, furniture and fixtures (12,360) (16,997)
Maturities of marketable debt securities - 85,450
Purchases of marketable debt securities (73,809) (76,702)
-------------- -------------
Net cash used in investing activities (86,169) (8,249)
-------------- -------------
Cash flows from financing activities:
Repayment of other obligations 1,725 46
Net proceeds for issuance of common stock 1,904 8,416
Tax benefit related to exercise of stock options 2,928 14,657
Repayment of notes from receivable stockholders 2 69
-------------- -------------
Net cash provided by financing activities 6,559 23,188
-------------- -------------
Net (decrease) increase in cash and cash equivalents (35,083) 4,889
Cash and cash equivalents at beginning of period 250,714 143,440
-------------- -------------
Cash and cash equivalents at end of period $ 215,631 $ 148,329
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
CIENA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The interim financial statements included herein for CIENA
Corporation (the "Company") have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of management, financial statements included in this report
reflect all normal recurring adjustments which the Company considers necessary
for the fair presentation of the results of operations for the interim periods
covered and of the financial position of the Company at the date of the interim
balance sheet. Certain information and footnote disclosures normally included in
the annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
understand the information presented. 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 the Company's
October 31, 1999 audited consolidated financial statements and notes thereto
included in the Company's Form 10-K annual report for the fiscal year ended
October 31, 1999.
Revenue Recognition
CIENA recognizes product revenue in accordance with the shipping
terms specified and where collection is reasonably assured. For transactions
where CIENA has yet to obtain customer acceptance, revenue is deferred until
the terms of acceptance are satisfied. Revenue for installation services is
recognized as the services are performed unless the terms of the supply contract
combine product acceptance with installation, in which case revenues for
installation services are recognized when the terms of acceptance are satisfied
and installation is completed. Revenues from installation service fixed price
contracts are recognized on the percentage-of-completion method, measured by the
percentage of costs incurred to date compared to estimated total costs for each
contract. Amounts received in excess of revenue recognized are included as
deferred revenue in the accompanying balance sheets. For distributor sales where
risks of ownership have not transferred, CIENA recognizes revenue when the
product is shipped through to the end user.
(2) INVENTORIES
<TABLE>
<CAPTION>
Inventories are comprised of the following (in thousands):
October 31, January 31,
1999 2000
------------ -----------
<S> <C> <C>
Raw materials $ 49,298 $ 44,333
Work-in-process 16,386 23,123
Finished goods 26,369 28,126
------------ -----------
92,053 95,582
Less reserve for excess and obsolescence (12,445) (12,973)
------------ -----------
$ 79,608 $ 82,609
============ ===========
</TABLE>
6
<PAGE> 7
(3) EARNINGS PER SHARE CALCULATION
The following is a reconciliation of the numerators and denominators of the
basic net income per common share ("basic EPS") and diluted net income per
common and dilutive 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 common shares outstanding,
and stock options using the treasury stock method (in thousands except per
share amounts).
<TABLE>
<CAPTION>
Quarter ended January 31,
---------------------------
1999 2000
------------ ---------
<S> <C> <C>
Net Income (loss) $ (1,881) $ 9,062
============ =========
Weighted average shares-basic 131,202 138,091
------------ ---------
Effect of dilutive securities:
Employee stock options and warrants - 9,812
------------ ---------
Weighted average shares-diluted 131,202 147,903
============ =========
Basic EPS $ (0.01) $ 0.07
============ =========
Diluted EPS $ (0.01) $ 0.06
============ =========
</TABLE>
During the quarter ended January 31, 2000 approximately 69,350 anti-diluted
weighted shares from employee stock options have been excluded from the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.
(4) COMPREHENSIVE INCOME
The components of comprehensive income (loss) are as follows (in
thousands):
<TABLE>
<CAPTION>
Quarter ended January 31,
-------------------------
1999 2000
------------ -----------
<S> <C> <C>
Net income (loss) $ (1,881) $ 9,062
Change in accumulated translation
adjustments (1) 38
------------ -----------
Total comprehensive income (loss) $ (1,882) $ 9,100
============ ===========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain forward-looking statements that involve
risks and uncertainties. The Company has set forth in its Form 10-K Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Risk Factors," as filed with the Securities and Exchange Commission
on December 10, 1999, a detailed statement of risks and uncertainties relating
to the Company's business. In addition, set forth below under the heading "Risk
Factors" is a further discussion of certain of those risks as they relate to the
period covered by this report, the Company's near-term outlook with respect
thereto, and the forward-looking statements set forth herein; however, the
absence in this quarterly report of a complete recitation of or update to all
risk factors identified in the Form 10-K should not be interpreted as modifying
or superseding any such risk factor, except to the extent set forth below.
Investors should review this quarterly report in combination with the Form 10-K
in order to have a more complete understanding of the principal risks associated
with an investment in the Company's Common Stock.
7
<PAGE> 8
OVERVIEW
CIENA is a leader in the rapidly emerging optical networking equipment
market. The Company offers a comprehensive portfolio of products for tele- and
data-communications service providers worldwide. CIENA's customers include
long-distance carriers, competitive local exchange carriers, Internet service
providers and wholesale carriers. CIENA offers optical transport, intelligent
switching and multi-service delivery systems that enable service providers to
provision, manage and deliver high-bandwidth services to their customers. The
Company has pursued a strategy to develop and leverage the power of disruptive
technologies to change the fundamental economics of building carrier-class tele-
and data-communications networks, providing its customers with a competitive
advantage.
During fiscal 1999 CIENA announced its LightWorks(TM) Initiative.
CIENA's LightWorks is an optical networking architecture designed to change the
fundamental economics of building service provider networks. LightWorks focuses
on the three critical areas of optical networking: optical transport, core
switching and service delivery. The products in CIENA's LightWorks combine the
functionality of several current network elements into a single network element,
thereby lowering the capital equipment requirements of a service provider and
simplifying the network, in order to reduce a carrier's network operating costs.
The products of CIENA's LightWorks architecture can be sold together as
a complete network solution or separately as best-of-breed solutions. Products
include four generations of long distance optical transport systems: MultiWave
1600(TM), MultiWave Sentry 1600(TM), MultiWave Sentry 4000(TM), and MultiWave
CoreStream(TM). LightWorks also includes CIENA's short distance optical
transport products: MultiWave Firefly(TM) and MultiWave Metro(TM). CIENA's
LightWorks architecture also includes the initial release of CIENA's MultiWave
EdgeDirector 500(TM), a multi-service transport platform, which enables carriers
to efficiently transport voice and data services over a single integrated fiber
access and interoffice network and the MultiWave CoreDirector(TM) product.
MultiWave CoreDirector is believed to be the world's first intelligent optical
core switch, allowing carriers to deliver a full range of transport services,
without costly SONET/SDH (synchronous optical networks/synchronous digital
hierarchy) multiplexers or inflexible "wavelength only" devices. We expect that
units of the MultiWave CoreDirector will be generally available in the second
half of calendar 2000. See "Risk Factors".
In November 1999, CIENA announced it was pursuing enhancements to its
MultiWave CoreStream product that will enable the system to offer the optimal
combination of ultra long-distance transport functionality and channel count to
further lower network costs for service providers. Using forward error
correction (FEC), nonlinearity management, and dispersion mapping technologies,
plus embedded software intelligence, MultiWave CoreStream will be able to
support optical spans longer than 5,000 kilometers without additional
optical-to-electrical signal regeneration. The Company expects to begin customer
trials with these features of this product in the end of the first half of
calendar 2000. See "Risk Factors".
During January 2000, CIENA announced the LightWorks Toolkit(TM) for
Optical Services, a series of new optics-, silicon- and software-based service
enablers. CIENA's LightWorks Toolkit will assist carriers with the transition
from static service provisioning to real-time, on demand bandwidth delivery;
from bandwidths limited by traditional SONET/SDH to optical bandwidth of any
size; and from a single wavelength quality of service to a range of service
qualities that can be dynamically configured and monitored. These
service-enabling tools, including Wavelength Binding, Flexible Concatenation,
and VSR Optics, are scheduled to be integrated into CIENA's LightWorks products
by the end of the third calendar quarter 2000. See "Risk Factors"
CIENA has increased the number of optical networking equipment customers
from a total of thirteen customers during the first quarter ended January 31,
1999 to twenty-five customers for current quarter ended January 31, 2000. The
Company intends to preserve and enhance its market leadership and eventually
build on its installed base with new and additional products. CIENA believes
that its product and service quality, manufacturing experience, and proven track
record of delivery will enable it to endure competitive pricing pressure while
it concentrates on efforts to reduce product costs and maximize production
efficiencies. See "Risk Factors".
We have received a substantial purchase order from a new customer for
equipment that will be manufactured and delivered in our second fiscal quarter.
Our ability to recognize revenue in that quarter from this substantial order
depends on our ability to deliver this equipment and satisfy the
8
<PAGE> 9
acceptance criteria prior to the end of the quarter. We have not previously
installed equipment for this customer and there is a risk that when we deploy
the equipment we will not be able to satisfy the acceptance criteria in a timely
manner. Because of the size of this new order, if we fail to satisfy the
acceptance criteria for this order prior to the end of the quarter, there
could be a material adverse effect on our business, financial position and
results of operations. See "Risk Factors".
As of January 31, 2000 CIENA employed 1,964 people, which was a
net increase of 36 persons over the 1,928 employed on October 31, 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 1999 COMPARED TO THREE MONTHS ENDED JANUARY
31, 2000
REVENUE. CIENA recognized revenues of $100.4 million and $152.2 million for
the first quarters ended January 31, 1999 and 2000, respectively.
The approximate $51.8 million or 51.6% increase in revenues in the first quarter
2000 compared to the first quarter 1999 was the result of an increase in
revenues recognized from twenty-five different optical networking equipment
customers in the quarter ended January 31, 2000, as compared to thirteen such
customers in the same quarter of the prior year. Additionally, during the
quarter ended January 31, 2000, each of two optical networking equipment
customers accounted for at least 10% or more of CIENA's quarterly revenue and
combined accounted for 39.8% of CIENA's quarterly revenue. This compares to the
quarter ended January 31, 1999 where each of three optical transport equipment
customers, accounted for at least 10% or more of the Company's quarterly revenue
and combined accounted for approximately 71.0% of the Company's quarterly
revenue. Revenues derived from foreign sales accounted for approximately 42.0%
of the Company's revenues during both the first quarters ended January 31, 1999
and January 31, 2000.
Revenues during CIENA's first quarter 2000 were largely attributed to
sales of MultiWave CoreStream, MultiWave Sentry 4000 and MultiWave Sentry 1600
long distance optical transport systems. This compares to CIENA's first quarter
1999 revenues, which were largely attributed to sales of CIENA's MultiWave
Sentry 4000 and MultiWave Sentry 1600 systems. MultiWave CoreStream systems were
not available for sale in CIENA's first quarter 1999. First quarter 2000
revenues also included sales of MultiWave Metro systems which also were not
available for sale during CIENA's first quarter 1999. Revenues derived from
engineering, furnishing and installation services decreased as a percentage of
total revenues from approximately 11.7% to 9.7% of the Company's revenues from
the first quarter ended January 31, 1999 compared to the first quarter ended
January 31, 2000, respectively.
The Company expects revenues in the near term to be largely dependent upon
sales to a new customer and several existing customers and to be largely derived
from continued sales of the MultiWave CoreStream, MultiWave Sentry 4000 and
MultiWave Metro. There are material risks associated with the Company's
dependence on these customers, as well as the successful ramping up of
manufacturing of these products. See "Risk Factors".
GROSS PROFIT. Cost of goods sold consists of component costs, direct
compensation costs, warranty and other contractual obligations, royalties,
license fees, inventory obsolescence costs and overhead related to the Company's
manufacturing and engineering, furnishing and installation operations. Gross
profits were $34.6 million and $65.2 million for the first quarters ended
January 31, 1999 and 2000, respectively. The approximate $30.6 million or 88.3%
increase in gross profit in the first quarter 2000 compared to the first quarter
1999 was the result of increased revenues and gross profit margin in the first
quarter 2000 compared to first quarter 1999. Gross margin as a percentage of
revenues was 34.5% and 42.8% for the first quarters 1999 and 2000, respectively.
The increase in gross margin percentage for the first quarter 2000 compared to
the first quarter 1999 was largely attributable to reductions in product costs
and an increase in production efficiencies partially offset by aggressive price
competition resulting in lower selling prices for optical transport systems.
The Company's gross margins may be affected by a number of factors,
including continued competitive market pricing, manufacturing volumes and
efficiencies and fluctuations in component costs. During the remainder of fiscal
2000, the Company expects to face continued pressure on gross margins, primarily
as a result of price discounting by competitors seeking to acquire market share.
See "Risk Factors."
9
<PAGE> 10
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$22.2 million and $29.7 million for the first quarters ended January 31, 1999
and 2000, respectively. During the first quarters 1999 and 2000, research and
development expenses were 22.1% and 19.5% of revenue, respectively. The
approximate $7.5 million or 33.9% increase in research and development expenses
in the first quarter 2000 compared to the first quarter 1999 was the result of
increases in staffing levels, usage of prototype materials, and depreciation
expense. CIENA expects that its research and development expenditures will
continue to increase during the remainder of fiscal year 2000 to support the
continued development of products for the LightWorks architecture, the
exploration and possible purchase of new or complementary technologies, and the
pursuit of various cost reduction strategies. The Company expenses research and
development costs as incurred.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses were $13.6
million and $18.1 million for the first quarters ended January 31, 1999 and
2000, respectively. During the first quarters 1999 and 2000, selling and
marketing expenses were 13.6% and 11.9% of revenues, respectively. The
approximate $4.5 million or 33.2% increase in selling and marketing expenses in
the first quarter 2000 compared to the first quarter 1999 was primarily the
result of increased staffing levels in the areas of sales, marketing, technical
assistance and field support, and costs for customer demonstration systems,
travel expenditures and rent expense. The Company anticipates that its selling
and marketing expenses will increase during the remainder of fiscal year 2000 as
additional personnel are hired and offices opened, particularly in support of
international market development, to allow the Company to pursue new market
opportunities.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $5.0 million and $6.9 million for the first quarters ended January 31, 1999
and 2000, respectively. During the first quarters 1999 and 2000, general and
administrative expenses were 5.0% and 4.5% of revenue, respectively. The
approximate $1.8 million or 36.4% increase in general and administrative
expenses from the first quarter 1999 compared to the first quarter 2000 was
primarily the result of increased staffing levels and outside consulting
services. The Company believes that its general and administrative expenses for
the remainder of fiscal 2000 will moderately increase due to the expansion of
the Company's administrative staff required to support its expanding operations.
INTEREST AND OTHER INCOME (EXPENSE), NET. Interest income and other income
(expense), net were $3.4 million and $3.0 million for the first quarters ended
January 31, 1999 and 2000, respectively. The approximate $0.4 million or 10.3%
decrease in interest income and other income (expense), net was largely
attributable to lower invested cash balances.
PROVISION (BENEFIT) FOR INCOME TAXES. CIENA's benefit for income taxes was
($1.0) million for the first quarter ended January 31, 1999. CIENA's provision
for income taxes was $4.4 million for the first quarter ended January 31, 2000.
During the first quarters 1999 and 2000, the tax rate used for income taxes were
35.6% and 32.5% of income (loss) before income taxes, respectively. The decline
in the income tax rate in first quarter 2000 compared to first quarter 1999 was
the result of a lower combined effective state income tax expenses, increased
benefits derived from the Company's Foreign Sales Corporation, and an increase
in expected tax credits derived from research and development activities.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2000, the Company's principal source of liquidity was its
cash and cash equivalents of $148.3 million and its marketable debt securities
of $110.2 million, which when combined, represent a decrease of approximately
$3.9 million from the October 31, 1999 cash and cash equivalents and marketable
debt securities combined balance. The Company's marketable debt securities have
maturities no longer than six months.
Cash used in operations was $10.1 million for the first quarter ended
January 31, 2000. This amount was principally attributable to an increase in
accounts receivable, increase in inventory, and a decrease in income taxes
payable.
Investment activities in the first quarter ended January 31, 2000 included
the net redemption of $8.7 million worth of corporate marketable debt
securities, and $17.0 million invested in capital expenditures. Of the amount
invested in capital expenditures, $14.8 million was used for additions to
capital equipment and furniture and the remaining $2.2 million was invested in
leasehold improvements. The Company expects to use an additional $80
10
<PAGE> 11
million to $90 million of capital during the remainder of fiscal 2000 for
construction of leasehold improvements for its facilities and additional
investments in capital equipment.
The Company believes that its existing cash balance and cash flows from
future operations will be sufficient to meet the Company's capital requirements
for at least the next 18 to 24 months.
YEAR 2000 READINESS
Many computer systems were not designed to handle any dates beyond the year
1999; accordingly, affected hardware and software needed to be modified prior to
the year 2000 in order to remain functional. CIENA's operations make use of a
variety of computer equipment and software. To date CIENA operations have not
been adversely impacted as a result of the year 2000 date change. If the
computer equipment and software used in the operation of CIENA and its products
do not correctly recognize subsequent date information during 2000, there could
be an adverse impact on CIENA's operations.
CIENA has taken actions to understand the nature and extent of work
required, if any, to make its systems, products and infrastructure Year 2000
compliant. Based on internal testing performed to date and completed by CIENA,
CIENA currently believes and warrants to its customers that its products are
Year 2000 compliant. However, since all customer situations cannot be
anticipated, particularly those involving interaction of CIENA's products with
third party products, CIENA may experience warranty and other claims as a result
of the Year 2000 transition. The impact of customer claims, if broader than
anticipated, could have a material adverse impact on CIENA's results of
operations or financial condition.
CIENA has concluded a comprehensive inventory and evaluation of either
information technology ("IT") or software systems and non-IT systems used to run
its systems. Non-IT systems typically include embedded technology such as
microcontrollers. Examples of CIENA's Non-IT systems include certain equipment
used for production, research, testing and measurement processes and
calibration. CIENA has completed the process of upgrading or replacing those
identified non-compliant systems. For the Year 2000 non-compliance systems
identified, the cost of remediation was not material to CIENA's financial
condition or operating results. However, if significant new noncompliance issues
are identified, CIENA's results of operations or financial condition may be
materially adversely affected.
CIENA changed its main financial, manufacturing and information system to a
company-wide Year 2000 compliant enterprise resource planning ("ERP")
computer-based system during the fourth quarter of fiscal 1998. CIENA estimates
that it has spent approximately $4.5 million on its ERP implementation. During
fiscal 1999, CIENA spent approximately $400,000 to address identified Year 2000
issues. During the first quarter of fiscal 2000, CIENA spent approximately
$40,000 to address identified Year 2000 issues. CIENA used cash from operations
for Year 2000 remediation and replacement costs. Approximately less than 2% of
the information technology budget was used for remediation. No other information
technology projects have been deferred due to the Year 2000 efforts. CIENA has
employed an independent verification consultant to validate CIENA's processes in
order to assure the reliability of CIENA's risk estimates. The consultant's
findings identify CIENA's processes as sufficient and our risk of negative
impact as low.
CIENA has contacted its critical suppliers to determine whether a
supplier's operations, products and services are Year 2000 compliant. To date,
CIENA's optical suppliers have represented that their products are Year 2000
compliant. If these suppliers fail to adequately address the Year 2000 issue for
the products they provide to CIENA, this could have a material adverse impact on
CIENA's operations and financial results. Initial contingency plans have been
developed in case CIENA or its key suppliers will not be Year 2000 compliant,
and such noncompliance is expected to have a material adverse impact on CIENA's
operations.
The risks to CIENA resulting from the failure of third parties in the
public and private sector to attain Year 2000 readiness are generally similar to
those faced by other firms in CIENA's industry or other business enterprises
generally. The following are representative of the types of risks that could
result in the event of one or more major failures of CIENA's information
systems, factories or facilities to be Year 2000 ready, or similar major
failures by one or more major third party suppliers to CIENA: (1) information
systems - could include interruptions or disruptions of business and transaction
processing such as customer billing, payroll, accounts payable and other
operating and information processes, until systems can be remedied or replaced;
(2) factories and facilities - could include
11
<PAGE> 12
interruptions or disruptions of manufacturing processes and facilities with
delays in delivery of products, until non-compliant conditions or components can
be remedied or replaced; and (3) major suppliers to CIENA could include
interruptions or disruptions of the supply of raw materials, supplies and Year
2000 ready components which could cause interruptions or disruptions of
manufacturing and delays in delivery of products, until the third party supplier
remedied the problem or contingency measures were implemented. Risks of major
failures of CIENA's principal products could include adverse functional impacts
experienced by customers, the costs and resources for CIENA to remedy problems
or replace products where CIENA is obligated or undertakes to take such action,
and delays in delivery of new products.
RISK FACTORS
OUR RESULTS CAN BE UNPREDICTABLE
Our ability to recognize revenue during a quarter from a customer
depends upon our ability to ship product and satisfy other contractual
obligations of a customer sale in that quarter. In general, revenue and
operating results in any reporting period may fluctuate due to factors
including:
- timing and size of orders from customers
- the introduction of new products
- availability of customer sites for installation
- satisfaction of contractual customer acceptance criteria and
related revenue recognition issues
- manufacturing and shipment delays and deferrals
Our optical networking products require a relatively large investment
and our target customers are highly demanding and technically sophisticated.
There are only a small number of customers in each geographic market and each
customer has unique needs. As a result, the sales cycles for our products are
long - often more than a year between our initial introduction to the customer
and their commitment to purchase.
We budget expense levels on our expectations of long-term future
revenue. These levels reflect our substantial investment in financial,
engineering, manufacturing and logistics support resources we think we may need
for large potential customers, even though we do not know the volume, duration
or timing of any purchases from them. As a result, we may continue to experience
increased inventory levels, operating expenses and general overhead.
We have received a substantial purchase order from a new customer for
equipment that will be manufactured and delivered in our second fiscal quarter.
Our ability to recognize revenue in that quarter from this substantial order
depends on our ability to deliver this equipment and satisfy the acceptance
criteria prior to the end of the quarter. We have not previously installed
equipment for this customer and there is a risk that when we deploy the
equipment we will not be able to satisfy the acceptance criteria in a timely
manner. Because of the size of this new order, if we fail to satisfy the
acceptance criteria for this order prior to the end of the quarter, there could
be a material adverse effect on our business, financial position and results of
operations.
Additionally, our Core Switching Division and Access Systems Division
have ongoing development and operating expenses but are not expected to
contribute materially to revenues until the second half of calendar 2000.
CHANGES IN TECHNOLOGY OR THE DELAYS IN THE DEPLOYMENT OF NEW PRODUCTS COULD HURT
OUR NEAR TERM PROSPECTS
The market for optical networking equipment is changing at a rapid pace.
The accelerated pace of deregulation in the telecommunications industry likely
will intensify the competition for improved technology. Our ability to
successfully develop and introduce new and enhanced products will depend upon
our ability to successfully anticipate changes in technology, industry standards
and customer requirements. If we fail to deploy
12
<PAGE> 13
new and improved products in a timely manner, our competitive position and
financial condition would be materially and adversely affected. The complexity
of the technology involved with several of our new products including the
MultiWave CoreDirector and the MultiWave CoreStream products using 10 Gb/s
transmission capability or ultra long-distance transport functionality could
result in unanticipated delays in development and manufacturing. In addition,
the complexity of technology associated with support equipment for these
products could result in unanticipated delays in the deployment of these
products. These delays could adversely affect our competitive and financial
condition.
The introduction of new products embodying new technologies or the
emergence of new industry standards could render our existing products
uncompetitive from a pricing standpoint, obsolete or unmarketable. Any of these
outcomes would have a material adverse effect on our business, financial
condition and results of operations. The certification process for new
telecommunications equipment used in RBOC networks, which is a process that
traditionally has included, among other things, testing by Telcordia
Technologies, has in the past resulted in and may continue to result in
unanticipated delays which may affect the deployment of our products for the
RBOC market.
Any delays in component availability for any of our products or test
equipment could result in delays in deployment of these products and in
recognizing revenues. These delays could adversely affect our customer
relationships and our results of operations.
WE FACE INTENSE COMPETITION WHICH COULD HURT OUR SALES AND PROFITABILITY
The market for optical networking equipment is extremely competitive.
Competition in the optical networking market is broadly based on varying
combinations of price, manufacturing capability, comprehensiveness of the system
solution meeting immediate network needs and foreseeable scalability
requirements. A small number of very large companies have historically dominated
the telecommunications equipment industry including Lucent, Alcatel, Nortel,
NEC, Pirelli, Siemens, Ericsson, Fujitsu, and Hitachi. Cisco has recently
announced its intention to purchase Pirelli's DWDM business. If this transaction
closes as expected Cisco will become a direct competitor. These companies have
substantial financial, marketing, manufacturing and intellectual property
resources. In addition, these companies have substantially greater resources to
develop or acquire new technologies. We sell systems which compete directly with
product offerings of these companies and in some cases displace their legacy
equipment. As such, we represent a specific threat to these companies. The
continued expansion of our product offerings with products such as the MultiWave
CoreDirector and MultiWave EdgeDirector likely will increase this perceived
threat. We expect continued aggressive tactics from many of these competitors,
including:
- substantial price discounting
- early announcements of competing products
- "one-stop shopping" appeals
- customer financing assistance
- intellectual property disputes
These tactics can be particularly effective in a highly concentrated
customer base such as ours. Our customers are under increasing competitive
pressure to deliver their services at the lowest possible cost. This pressure
may result in pricing for optical networking systems becoming a more important
factor in customer decisions, which may favor larger competitors that can spread
the effect of price discounts in their optical networking product lines across
an array of products and services and across a customer base which is larger
than ours. Our inability to compete successfully against our competitors would
have a material adverse effect on our business, financial condition and results
of operations.
Several of our customers have indicated that they intend to establish a
second vendor for optical transport products. We do not know when or if these
customers will select a second vendor or what impact the selection might have on
purchases from us. These customers could reduce their purchases from us, which
could in turn have a material adverse effect on us.
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<PAGE> 14
New competitors may also emerge to compete with our existing products as
well as our future products. There has been an increase in funding of new
companies intending to develop new products for the optical networking market.
These companies have time to market advantages due to the narrow and exclusive
focus of their efforts and in some cases offer equity stakes to attract new
customers. In particular, a number of companies, including several start-ups,
have announced products that compete with our MultiWave CoreStream, Multiwave
Metro, MultiWave CoreDirector and MultiWave EdgeDirector products.
WE MAY NOT BE ABLE TO SUCCESSFULLY COMPLETE DEVELOPMENT AND ACHIEVE COMMERCIAL
ACCEPTANCE OF NEW PRODUCTS
The MultiWave CoreDirector is in the customer trials phase. We expect
that units of the Multiwave CoreDirector will be generally available in
the second half of calendar 2000. Enhancements to the MultiWave CoreStream
product to offer ultra long-distance transport functionality is in the
development phase and has not matured into commercially manufacturable units
suitable for field deployment. We expect to begin customer trials of these
features of the MultiWave CoreStream product in the end of the first half of
calendar 2000. The maturing process from laboratory prototype to customer
trials to commercial acceptance involves a number of steps, including:
- successful completion of product development
- the qualification and multiple sourcing of critical components,
including application-specific integrated circuits ("ASIC's")
which are not yet finalized
- validation of manufacturing methods
- extensive quality assurance and reliability testing, and staffing
of testing infrastructure
- software validation
- establishment of systems integration and burn in requirements, and
- identification and qualification of component suppliers
Each of these steps in turn presents serious risks of failure, rework or
delay, any one of which could materially and adversely affect the speed and
scope of product introduction and marketplace acceptance of the products.
Specialized ASIC's and intensive software testing and validation, in particular,
are key to the timely introduction of the MultiWave CoreDirector, and schedule
delays are common in the final software and validation phase, as well as in the
manufacture of specialized ASICS. In addition, unexpected intellectual property
disputes, failure of critical design elements, and a host of other execution
risks may delay or even prevent the introduction of these products.
If we do not develop these products in a timely manner, our competitive
position and financial condition could be adversely affected. The markets for
the MultiWave CoreDirector and MultiWave EdgeDirector products are relatively
new. Commercial acceptance of these products also is not established and there
is no assurance that the substantial sales and marketing efforts necessary to
achieve commercial acceptance in traditionally long sales cycles will be
successful. If the markets for these products do not develop or the products are
not accepted by the market, our competitive position and financial condition
could be adversely affected.
We are in the laboratory testing phase for future releases of the
MultiWave EdgeDirector product. These releases expand upon the limited
functionality of the initial release of the MultiWave EdgeDirector and address
anticipated market requirement. We can make no assurances of the market
acceptance for the initial release of the MultiWave EdgeDirector or our ability
to introduce future releases of the MultiWave EdgeDirector that gain market
acceptance. If market acceptance of the initial or future releases of the
MultiWave EdgeDirector is limited, or we are unable to successfully develop
future releases of the MultiWave EdgeDirector, our competitive position and
financial condition could be adversely affected.
14
<PAGE> 15
WE MAY EXPERIENCE DELAYS FROM OUR SUPPLIERS AND FOR SOME ITEMS WE DO NOT HAVE
SUBSTITUTE SUPPLIERS
We depend on a small number of suppliers for components of our products,
as well as equipment used to manufacture and test our products. Our highest
capacity product currently being shipped, the MultiWave CoreStream which
currently is capable of up to 96 channels at 2.5 Gb/s or up to 48 channels at
10.0 Gb/s transmission speeds, includes several higher performance components
for which reliable, high volume suppliers are particularly limited. On occasion,
we have experienced delays in receipt of components. Any future difficulty in
obtaining sufficient and timely delivery of them could result in delays or
reductions in product shipments which, in turn, could have a material adverse
effect on our business, financial condition and results of operations. Our
availability of components could be adversely impacted by a recent wave of
consolidation in the industry, such as the recent purchase of E-Tech by JDS
Uniphase. Delayed deliveries of key components from these sources could have a
material adverse effect on CIENA's near-term results of operations.
SMALLER CUSTOMERS MAY INCREASE FLUCTUATION IN OUR RESULTS
As we continue to address smaller emerging carriers, timing and volume
of purchasing from these carriers can also be more unpredictable due to factors
such as their need to build a customer base, acquire rights of way and
interconnections necessary to sell network service, and build out new capacity,
all while working within capital budget constraints. This increases the
unpredictability of our financial results because even these carriers purchase
our products in multi-million dollar increments.
Unanticipated changes in customer purchasing plans also create
unpredictability in our results. A portion of our anticipated revenue over the
next several quarters is comprised of orders of less than $25 million each from
several customers, some of which involve extended payment terms or other
financing assistance. Our ability to recognize revenue from financed sales to
these carriers will be impacted by their financial condition. Further, we will
need to evaluate the collectibility of receivables from these carriers if their
financial condition deteriorates in the future. Purchasing delays, changes in
the financial condition or the amount of purchases by any of these customers,
could have a material adverse effect on us.
OUR SUCCESS LARGELY DEPENDS ON OUR ABILITY TO RETAIN KEY PERSONNEL
Our success has always depended in large part on our ability to attract
and retain highly-skilled technical, managerial, sales and marketing personnel,
particularly those skilled and experienced with optical communications
equipment. Our key founders and employees, together with the key founders and
employees of Lightera and Omnia have received a substantial number of CIENA
shares and vested options that can be sold at substantial gains. In many cases,
these individuals could become financially independent through these sales,
before CIENA's future products have matured into commercially deliverable
products. Under the circumstances, we face a difficult and significant task of
retaining and motivating these key personnel. As CIENA has grown and matured,
competitors' efforts to entice our employees to leave have intensified,
particularly among competitive startups and other early stage companies seeking
to replicate CIENA's experience. CIENA and its employees are parties to
agreements that limit the employee's ability to work for a competitor and to
solicit CIENA employees and customers following termination of employment. We
expect our competitors will respect these agreements and not interfere with
them. However, CIENA has in the past been required to enforce and currently is
in the process of enforcing some of these agreement. We expect in the future to
continue to be required to resort to legal actions to enforce these agreements.
We could incur substantial costs in enforcing these claims. We can make no
assurances that we will be successful in these suits, or that we will be able to
retain all of our key contributors or attract new personnel to add to or replace
them. The loss of key personnel would likely have a material adverse effect on
our business, financial condition and results of operations.
PRODUCT PERFORMANCE PROBLEMS COULD LIMIT OUR SALES PROSPECTS
The production of new optical networking products and systems with high
technology content involves occasional problems as the technology and
manufacturing methods mature. We are aware of instances domestically and
internationally of delayed installation and activation of some of our products
due to faulty components. If significant reliability, quality or network
monitoring problems develop, a number of material adverse effects could
result, including:
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<PAGE> 16
- manufacturing rework costs
- high service and warranty expense
- high levels of product returns
- delays in collecting accounts receivable
- reduced orders from existing customers, and
- declining interest from potential customers
Although we maintain accruals for product warranties, actual costs could
exceed these amounts.
From time to time, there will be interruptions or delays in the
activation of our products and the addition of channels, particularly because we
do not control all aspects of the installation and activation activities. If we
experience significant interruptions or delays that we can not promptly resolve,
confidence in our products could be undermined, which could have a material
adverse effect on us.
OUR PROSPECTS DEPEND ON DEMAND WHICH WE CANNOT PREDICT OR CONTROL
We may not anticipate changes in direction or magnitude of demand for
our products. Unanticipated reductions in demand for our products would
adversely affect us, as can upsurges in demand.
Our products enable high capacity transmission over long distance, and
certain short-haul portions, of optical communications networks. Our Multiwave
CoreDirector product is targeted to high capacity applications and our Multiwave
EdgeDirector product is targeted to providers of integrated fiberoptic access
and transport networks. Customers, however, determine:
- the quantity of bandwidth needed
- the timing of its deployment, and
- the equipment configurations and network architectures they want
Customer determinations are subject to abrupt change in response to
their own competitive pressures, pressures to raise capital and financial
performance expectations.
Recently we have experienced an increased level of sales activity that
could lead to an upsurge in demand that is reflected in the overall increase in
demand for optical networking and similar products in the telecommunications
industry. Our results may be adversely affected if we are unable to address this
demand adequately by successfully scaling up our manufacturing capacity and
hiring additional qualified personnel. To date we have largely depended on our
own manufacturing and assembling facilities to meet customer expectations, but
we cannot be sure that we can meet those expectations in all cases by internal
capabilities. In that case, we face the challenge of adequately managing
customer expectations and/or finding alternative means of meeting them.
OUR STOCK PRICE MAY EXHIBIT VOLATILITY
Our common stock price has experienced substantial volatility in the
past, and is likely to remain volatile in the future. Volatility can arise as a
result of the activities of short sellers and risk arbitrageurs, and may have
little relationship to our financial results or prospects. Volatility can also
result from any divergence between our actual or anticipated financial results
and published expectations of analysts, and announcements we may make. We
attempt to address this possible divergence through our public announcements and
reports; however, the degree of specificity we can offer in these announcements,
and the likelihood that any forward-looking statements we make will prove
correct in actual results, can and will vary. This is due primarily to:
16
<PAGE> 17
- the uncertainties associated with our dependence on a small number
of existing and potential customers
- the impact of changes in the customer mix
- the actions of competitors
- long and unpredictable sales cycles and customer purchasing
programs
- the absence of unconditional minimum purchase commitments from any
customer
- a lack of visibility into our customers' deployment plans over the
course of the capital equipment procurement year, and
- the lack of reliable data on which to anticipate core demand for
high bandwidth transmission capacity and for demand for edge
service delivery and optical switching products such as our
MultiWave CoreDirector.
Divergence will likely occur from time to time in the future, with
resulting stock price volatility, irrespective of our overall year-to-year
performance or long-term prospects. As long as we continue to depend on
relatively few customers, and particularly when a substantial majority of their
purchases consist of newly-introduced products like the MultiWave CoreStream,
Multiwave EdgeDirector and MultiWave Metro, there is substantial risk of widely
varying quarterly results.
LEGAL PROCEEDINGS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS
In August 1998, shareholder class action lawsuits were filed against us
and certain of our officers and directors. These lawsuits, which were
consolidated into one amended complaint, which was dismissed by the United
States District Court on July 19, 1999, with leave to amend. On August 20, 1999
plaintiffs filed the second amended class action compliant. We have filed and
briefed a motion asking the Court to dismiss the second amended complaint. On
January 21, 2000 the Court heard oral argument on the second amended complaint.
On January 24, 2000 the Court granted plaintiffs leave to amend the second
amended complaint, which they did on February 3, 2000. Motion to dismiss the
second amended complaint, as amended on February 3, 2000, is currently pending
before the Court. We believe the allegations in the complaint are without merit
and intend to defend the case vigorously. If we do not prevail at the motion
stage, and after discovery and trial, the case is decided adversely to CIENA, it
could have a material adverse effect on our financial condition and results of
operations.
SOME OF OUR SUPPLIERS ARE ALSO OUR COMPETITORS
Some of our component suppliers are both primary sources for components
and major competitors in the market for system equipment. For example, we buy
certain components from:
- Lucent
- Alcatel
- Nortel
- NEC, and
- Siemens
Each of these companies offers optical communications systems and
equipment which are competitive with our products. Also, Lucent is the sole
source of two components and is one of two suppliers of two others. Alcatel and
Nortel are suppliers of lasers used in our products and NEC is a supplier of an
important piece of testing
17
<PAGE> 18
equipment. A decline in reliability or other adverse change in these supply
relationships could materially and adversely affect our business, financial
condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. The Company is exposed to
market risk related to changes in interest rates and foreign currency exchange
rates. The Company does not use derivative financial instruments for speculative
or trading purposes.
INTEREST RATE SENSITIVITY. The Company maintains a short-term investment
portfolio consisting mainly of corporate debt securities and U.S. government
agency discount notes with an average maturity of less than six months. These
held-to-maturity securities are subject to interest rate risk and will fall in
value if market interest rates increase. If market interest rates were to
increase immediately and uniformly by 10 percent from levels at January 31,
2000, the fair value of the portfolio would decline by approximately $4.5
million. The Company has the ability to hold its fixed income investments until
maturity, and therefore the Company would not expect its operating results or
cash flows to be affected to any significant degree by the effect of a sudden
change in market interest rates on its securities portfolio.
FOREIGN CURRENCY EXCHANGE RISK. As a global concern, the Company faces
exposure to adverse movements in foreign currency exchange rates. These
exposures may change over time as business practices evolve and could have a
material adverse impact on the Company's financial results. Historically the
Company's primary exposures have been related to nondollar-denominated operating
expenses in Canada, Europe and Asia where the Company sells primarily in U.S.
dollars. The introduction of the Euro as a common currency for members of the
European Monetary Union began during the Company's fiscal year 1999. The foreign
currency exposure resulting from the introduction of the Euro has been
immaterial to the operating results of the Company. The Company is prepared to
hedge against fluctuations in the Euro if this exposure becomes material. As of
January 31, 2000 the assets and liabilities of the Company related to non-dollar
denominated currencies was not material. Therefore we do not expect that an
increase or decrease of 10 percent in the foreign exchange rate would have a
material impact on the Company's financial position.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CLASS ACTION LITIGATION
A class action complaint was filed on August 26, 1998 in U.S. District
Court for the District of Maryland entitled Witkin et al. v. CIENA Corporation
et al. (Case No. Y-98-2946). Several other complaints, substantially similar in
content were consolidated by court order on November 30, 1998. An amended,
consolidated complaint was filed on February 16, 1999. On July 19, 1999 the
United States District Court dismissed the suit with leave to amend before any
discovery had been taken. On August 20, 1999, plaintiffs filed a second amended
class action complaint alleging that CIENA and certain officers and directors
violated certain provisions of the federal securities laws, including Section
10(b) and Rule 10b-5 under the Securities Exchange Act of 1934, by making false
statements, failing to disclose material information and taking other actions
intending to artificially inflate and maintain the market price of CIENA's
common stock during the Class Period of May 21, 1998 to September 14, 1998,
inclusive. The plaintiffs intend to seek certification of the suit as a class
action on behalf of all persons who purchased shares of CIENA's common stock
during the Class Period and the awarding of compensatory damages in an amount to
have been determined at trial together with attorneys' fees. CIENA has filed,
and the parties have fully briefed, a motion to dismiss the second amended
complaint. On January 21, 2000 the Court heard oral argument on the second
amended complaint. On January 24, 2000, the Court granted plaintiffs leave to
amend the second amended complaint, which they did on February 3, 2000. A motion
to dismiss the second amended complaint, as amended on February 3, 2000, is
currently pending before the Court. CIENA believes the suit is without merit and
CIENA intends to continue to defend the case vigorously.
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<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Description
27.0 Financial Data Schedule (filed only
electronically with the SEC)
Reports on Form 8-K: No reports on Form 8-K were filed during the
period.
19
<PAGE> 20
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: February 17, 2000 By: /s/ Patrick H. Nettles
----------------- ----------------------
Patrick H. Nettles
President, Chief Executive Officer
and Director
(Duly Authorized Officer)
Date: February 17, 2000 By: /s/ Joseph R. Chinnici
----------------- ----------------------
Joseph R. Chinnici
Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains Summary Financial Information extracted from The Balance
Sheet, Statement of Operation and Statement of Cash Flows included in the
Company's Form 10-Q for the period ending January 31, 2000, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 148,329
<SECURITIES> 110,208
<RECEIVABLES> 168,197
<ALLOWANCES> 1,953
<INVENTORY> 82,609
<CURRENT-ASSETS> 558,478
<PP&E> 230,852
<DEPRECIATION> 101,593
<TOTAL-ASSETS> 707,158
<CURRENT-LIABILITIES> 102,396
<BONDS> 0
0
0
<COMMON> 1,398
<OTHER-SE> 561,327
<TOTAL-LIABILITY-AND-EQUITY> 707,158
<SALES> 152,213
<TOTAL-REVENUES> 152,213
<CGS> 87,003
<TOTAL-COSTS> 87,003
<OTHER-EXPENSES> 54,735
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 13,425
<INCOME-TAX> 4,363
<INCOME-CONTINUING> 9,062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,062
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.06
</TABLE>
