ANNUAL REPORT 2007 focused 1201 Winterson Road, Linthicum, Maryland 21090-2205 (410) 865-8500 (800) 921-1144 www.Ciena.com 002CS-60908 corporate information corporate headquarters operating executive outside board members Ciena Corporation offi cers Stephen P. Bradley, Ph.D. focused on growth 1201 Winterson Road Patrick H. Nettles, Ph.D. William Ziegler Professor Linthicum, MD 21090-2205 Executive Chairman of the of Business Administration Telephone: (800) 921-1144 Board of Directors Harvard Business School or (410) 865-8500 We’re focused on achieving profi table revenue growth that drives Gary B. Smith Harvey B. Cash www.Ciena.com President, Chief Executive Offi cer General Partner sustained shareholder value. By targeting high-growth market segments and Director InterWest Partners annual meeting and high-value applications, we’re capturing increasing market share. Ciena’s annual meeting of share- Stephen B. Alexander Bruce L. Clafl in And our focus and hard work are paying off, resulting in faster revenue holders will be held at 3:00 pm on Senior Vice President, Products Retired, President and CEO Wednesday, March 26, 2008 at the and Technology, and 3Com Corporation Chief Technology Offi cer growth than our overall market sector. Baltimore Marriott Waterfront Hotel, Lawton W. Fitt 700 Aliceanna Street, Baltimore, MD. James E. Moylan, Jr. Senior Advisor Senior Vice President, Finance, GSC Group independent registered and Chief Financial Offi cer Judith M. O’Brien public accounting fi rm annual revenue up $216 Arthur D. Smith, Ph.D. Executive Vice President PricewaterhouseCoopers LLP $205 Senior Vice President and Obopay, Inc. McLean, VA $194 Chief Operating Offi cer Michael J. Rowny general counsel Michael G. Aquino Chairman $165 Hogan & Hartson LLP Senior Vice President, Rowny Capital $160 Baltimore, MD Worldwide Sales 38% $152 Gerald H. Taylor Russell B. Stevenson, Jr. Managing Member $131 transfer agent Senior Vice President, General mortonsgroup, LLC $120 Computershare Trust Company, N.A. Counsel and Secretary $118 P.O. Box 43078 Andrew C. Petrik Providence, RI 02940-3078 Vice President, Controller Shareholder Inquiries: (781) 575-2879 and Treasurer www.Computershare.com common stock market data solid revenue growth Since its initial public offering on (in millions) February 7, 1997, Ciena’s Common Stock has traded on the Nasdaq Stock Market under the symbol CIEN. Q4’05 Q1’06 Q2’06 Q3’06 Q4’06 Q1’07 Q2’07 Q3’07 Q4’07 investor relations For additional copies of this report or other fi nancial information, contact: Investor Relations Ciena Corporation 1201 Winterson Road Linthicum, MD 21090-2205 IR Hotline: (888) 243-6223 ©2008 Ciena Corporation Design: Financial Communications Inc. Bethesda, MD www.fcicreative.com or (410) 694-5700 Additional information is available on Ciena Corporation is a global leader in communication network platforms, software and professional services. Our specialty Ciena’s website at www.Ciena.com. is transitioning networks for maximum business value, operational value and end-user value. Integrating expertise in optical, access and data networking, Ciena enables the delivery of more services faster, transforms the network cost base, and improves the end-user experience. With industry-leading functionality and performance, Ciena’s offerings form the foundation for many of the largest, most reliable and sophisticated telco, cable/MSO, enterprise and government networks across the globe. Gary B. Smith, President and Chief Executive Officer fellow shareholders, 2007 was a momentous year for Ciena. 2007 as we developed and delivered balance and providing an improved By most any measure, we demonstrated innovative solutions to meet our customers’ foundation for future growth. In these concrete, quantifiable success. By remaining evolving needs. Our combined success on times of uncertainty in the credit markets, true to our strategic focus as the specialist all of these fronts enabled us to continue we believe this represents prudent in network transition—and supported to invest in research and development— financial management and provides by the well-timed introduction of our the fuel that enables us to maintain our us a competitive edge. FlexSelectTM Architecture, our practical leadership position—as well as to continue vision to help our customers transition to build a fast and agile operations 2007 achievements—successful from current legacy infrastructures to infrastructure to support future growth. base for future growth next-generation networks—we benefited Our efforts to strike an optimal balance We set out at the beginning of the year from both pure capacity-related network between reinvesting in our business for to leverage our market momentum growth as well as a sweeping trend toward longer-term growth and profitability by pursuing opportunities to further next-generation, Ethernet/IP-based were reflected in solid financial perfor- advance our technology leadership and network infrastructures. mance: GAAP operating profit of more market position. Let me take a few For fiscal 2007 we delivered revenue than 10 percent for fiscal year 2007, moments to summarize our progress. growth well above the average of the compared to 2 percent in 2006, and net industry, gross margin improvement and income of $82.8 million, or $0.87 per customers operating margin expansion, which we diluted share, in fiscal 2007, compared We expanded the breadth and depth successfully leveraged into a substantial to $0.6 million, or $0.01 per diluted share, of our customer base, with significant increase in profitability. For the year ended in fiscal 2006. growth in our international business. October 31, 2007, revenue increased This strong financial performance Sales in North America grew more than 38 percent to $780 million. We improved also included a substantial improvement 30 percent year-over-year, and international gross margin from 45.7 percent in fiscal in cash flow generation, enabling us sales rose 55 percent, with business won year 2006 to 46.5 percent in fiscal year to build on an already significant cash in 10 new countries. Notably, our partner 16% 14% $34 9% $28 8% 7% 7% operating profit $14 $13 $13 performance $12 0% (in millions) as-adjusted operating profit -$12 as-adjusted operating margin -10% -$20 -17% Q4’05 Q1’06 Q2’06 Q3’06 Q4’06 Q1’07 Q2’07 Q3’07 Q4’07 sales worldwide increased more than hensive strategy to make Ethernet a carrier- re-engineer our business model and these new and emerging traffic types on the momentum we have established. First, we remain focused on improving 45 percent in fiscal 2007. class, performance-grade convergence globalize our company. Our team is simultaneously with more traditional I’d like to share three concepts on which our operations to ensure we perform as In our traditional customer segment, vehicle from the access network to constantly identifying areas for further voice and data traffic. we will focus in 2008: an agile global enterprise. Second, we the highly competitive telecommunications the network core. With this move, we improvement and efficiency. On the enterprise or business side, are committed to pursuing high-growth • Innovation: Our unrelenting efforts service provider market, we added 12 new committed to adding new products and Paramount among these activities customers face expanding compliance market opportunities to deliver faster- to develop leading-edge network customers, and we sold new products capabilities to make it possible for flexible, are process and system improvements. needs and increased capacity demands than-market revenue growth. Third, we technology and translate those into 14 existing accounts. converged Ethernet-based networks We’ve made tremendous progress with a created by new business applications, as will continue to implement our FlexSelect ideas into practical solutions will We continue to see opportunities available to deliver any type of service successful upgrade to our Oracle business well as increased use of video and strains Architecture vision to advance our market, help our customers meet the growing to apply our expertise in simple and with unparalleled resiliency, service quality system in November. This transition affords of overall globalization efforts. Wireless technology and thought leadership in and ever-changing demands of highly reliable networks to a wide range and management control. us a solid platform on which to scale and carriers—as well as wholesale carriers— next-generation networks. And, finally, their customers; of enterprise applications. In fact, our Supporting this goal, we announced automate the entire business worldwide are rapidly searching for ways to migrate we will leverage the strength of our non-traditional/non-telecommunications our CN 3000TM Ethernet Access Series and going forward. their backhaul networks to more • Globalization: We must continue business model and resources to scale business contributed more than 15 percent CN 5060TM Multiservice Carrier Ethernet We’re also continually streamlining efficiently support mobile traffic growth, the geographic expansion of our the company for future growth and of our overall revenue in fiscal 2007. We Platform, both of which are gaining traction our supply chain for greater efficiency, new data services, and expanded customer base, especially in fast-growing improved financial performance. secured 19 additional customers in the in the market. In fact, we announced in re-engineering front-end processes geographic coverage. economies worldwide,