Tom Mock Sr. Vice President, Strategic Planning June 3, 2004 Tom Mock Sr. Vice President, Strategic Planning June 3, 2004 Friedman Billings Ramsey 8 th

Tom MockSr. Vice President, Strategic Planning

June 3, 2004

Tom MockSr. Vice President, Strategic Planning

June 3, 2004

Friedman Billings Ramsey8th Annual Growth Investor Conference

Friedman Billings Ramsey8th Annual Growth Investor Conference

CIENA: Beyond OpticalCIENA: Beyond Optical

2

Forward-Looking Statements Forward-Looking Statements

This presentation may contain “forward-looking statements.” These statements are based on our expectations and are naturally subject to uncertainty and changes in circumstances. Actual results could vary materially from these expectations. More detailed information about the risks involved in investing in CIENA’s stock are set forth in CIENA’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004. CIENA is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

This presentation may contain “forward-looking statements.” These statements are based on our expectations and are naturally subject to uncertainty and changes in circumstances. Actual results could vary materially from these expectations. More detailed information about the risks involved in investing in CIENA’s stock are set forth in CIENA’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2004. CIENA is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

3

AgendaAgenda

• CIENA’s approach

• Where we were

• What changed?

• CIENA: Beyond optical

• CIENA’s Transformation: Beyond the product portfolio

4

Equipment Vendor Options Equipment Vendor Options

RadicallyAlter Business

Model

RadicallyAlter Business

Model

SycamoreSycamore CorvisCorvis

Do NothingDo Nothing Cut Costs (Limit Products/Markets)

Cut Costs (Limit Products/Markets)

Enter NewMarkets

Enter NewMarkets

AlcatelLucentNortel

AlcatelLucentNortelCiscoCisco SiemensSiemens Tellab

sTellab

s

AFCIAFCI

Expand w/inExisting Mkt

Expand w/inExisting Mkt

SonusSonus

JuniperJuniper

CIENA’s approach: Designed to enable stronger long-term revenue/earnings growth potential vs. short-term profitability with

nothing to fuel growth forward

CIENA’s approach: Designed to enable stronger long-term revenue/earnings growth potential vs. short-term profitability with

nothing to fuel growth forward

5

Core Network

CoreStream™

CoreDirector™

CIENA Led the Optical Core RevolutionCIENA Led the Optical Core Revolution

2000 - 20032000 - 2003

Ca

pe

x$

/ M

bp

s

Long Haul DWDM TransportLong Haul DWDM Transport

1996 - 20001996 - 2000

$25$25

$5$5

$50$50

CAPEXCAPEX OPEXOPEX REVENUEREVENUE

$ M

illi

on

s$

Mil

lio

ns 43%43%

36%36%16%16%

Core Optical SwitchingCore Optical Switching

0

100

200

300

400

500

600

700

99%99%

CAPEXCAPEXTraditionalTraditional

CIENACIENA 2000 - 20032000 - 2003

Ca

pe

x$

/ M

bp

s


1996 - 20001996 - 2000

$25$25

$5$5

$50$50


$ M

illi

on

s$

Mil

lio

ns 43%43%

36%36%16%16%


0

100

200

300

400

500

600

700

99%99%


CIENACIENA 2000 - 20032000 - 2003

Ca

pe

x$

/ M

bp

s


1996 - 20001996 - 2000

$25$25

$5$5

$50$50


$ M

illi

on

s$

Mil

lio

ns 43%43%

36%36%16%16%


0

100

200

300

400

500

600

700

99%99%


CIENACIENA 2000 - 20032000 - 2003

Ca

pe

x$

/ M

bp

s


1996 - 20001996 - 2000

$25$25

$5$5

$50$50


$ M

illi

on

s$

Mil

lio

ns 43%43%

36%36%16%16%


0

100

200

300

400

500

600

700

99%99%


CIENACIENA 2000 - 20032000 - 2003

Ca

pe

x$

/ G

b/s


1996 - 20001996 - 2000

$25$25

$5$5

$50$50


$ M

illi

on

s$

Mil

lio

ns 43%43%

36%36%16%16%


0

100

200

300

400

500

600

700

99%99%


CIENACIENA 2000 - 20032000 - 2003

Ca

pe

x


1996 - 20001996 - 2000

$25$25

$5$5

$50$50


$ M

illi

on

s$

Mil

lio

ns 43%43%

36%36%16%16%


0

100

200

300

400

500

600

700

99%99%


CIENACIENA

Success driven by disruptive economics

6

0

10

20

30

40

50

60

CIENA LUCENT ALCATEL SYCAMORE NORTEL CISCO MARCONI

Rel

ativ

e O

pti

cal S

wit

chin

g C

apac

ity

CIENA’s Optical Switching LeadershipCIENA’s Optical Switching Leadership

Source: Dell’Oro Q303 report for relative switching capacity. Excludes the former Tellium switch, which appears to be no longer offered after Zhone acquired Tellium.Source: Dell’Oro Q303 report for relative switching capacity. Excludes the former Tellium switch, which appears to be no longer offered after Zhone acquired Tellium.

4.4x4.4x6 x6 x

9 x9 x

23 x23 x 66 x66 x18 x18 x

• More optical switch capacity than all other competitors combined.

• Shipped 630+ optical switches; >70% can switch 640G

• Built the world’s largest intelligent optical switch network: 115+ switches

• 20+ customers have field deployed at least 10 switches each

• 30+ customers on 4 major continents

• More optical switch capacity than all other competitors combined.

• Shipped 630+ optical switches; >70% can switch 640G

• Built the world’s largest intelligent optical switch network: 115+ switches

• 20+ customers have field deployed at least 10 switches each

• 30+ customers on 4 major continents

CIENA Cumulative Optical Switch Capacity Shipped Relative To Remaining Competitors, 2001 – Q203

7

Core Network

CoreStream™

CoreDirector™

CIENA’s Optical Portfolio ExpansionCIENA’s Optical Portfolio Expansion

Metro Network

MetroDirectorK2™

Access Network

ONLINE EdgeONLINE Edge

ONLINE™ Metro

8

LinthicumLinthicumAlpharetta

$18 / Mbps$18 / Mbps$650 / Mbps$650 / Mbps $650 / Mbps$650 / Mbps

Source: Infonetics, Dell’Oro, CIENA Internal Estimates

Relative costof equipmentRelative costof equipment

The Operators’ “pain point”has moved…

The Operators’ “pain point”has moved…

…and spending has shifted to service delivery

…and spending has shifted to service delivery

Core Optical Market is in DeclineCore Optical Market is in Decline

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

2002 2003 2004 2005 2006

Carr

ier

Spend (

$M

)

Core & Infrastructure Service Delivery

• The core is no longer the primary challenge.

• Carriers shifting emphasis from CAPEX/OPEX reduction to top-line growth.

• Protecting voice revenues remains a priority.

• Service providers looking for strategic partners to deliver profitable broadband services originating from the edge.

9

Core Network

CoreDirector™

Capturing Services RevenueCapturing Services Revenue

Metro Network

MetroDirectorK2™

Access Network

ONLINE EdgeONLINE Edge

ONLINE™ Metro

Voice/video/DSL Services

VoD/HDTVServices

MPLS/ATM/FRServices

IPServices

Private LineServices

StorageServices

EthernetServices

An intelligent optical core enables an all-service network, but CIENA’s portfolio

lacked service delivery platforms customers needed to capture new

revenue growth

An intelligent optical core enables an all-service network, but CIENA’s portfolio

lacked service delivery platforms customers needed to capture new

revenue growthCoreStream™

10

Preserve the Core; Expand Service PortfolioPreserve the Core; Expand Service Portfolio

• Protect brand and customer base by continuing investment in the core at reduced levels

• Diversify into service delivery with a coherent portfolio• Target underserved, high growth segments that leverage CIENA’s

brand and customer equity

• Protect brand and customer base by continuing investment in the core at reduced levels

• Diversify into service delivery with a coherent portfolio• Target underserved, high growth segments that leverage CIENA’s

brand and customer equity

VoIPVoIPHDTVHDTVVideo on DemandVideo on DemandEthernetEthernet

IP VPNsIP VPNsDSLDSLPrivate

LinesPrivateLines

StorageStorage

InternetAccessInternetAccess

11

CIENA’s Acquisition/Partnership GoalsCIENA’s Acquisition/Partnership Goals

1. Expand addressable market with service delivery platforms

2. Leverage core leadership/strengths

3. Leverage customer base/relationships

4. Improve CIENA’s business model

– Drive revenue growth

– Improve gross margins

– Push toward sustained profitability

12

Disciplined Acquisition StrategyDisciplined Acquisition Strategy

Candidates should:

– Be disruptive to existing network economics

– Fit with CIENA’s network vision

– Have adjacency (via customer or technology)

– Deliver good margin profile

– Have channel fit or provide new channel

– Have visible path to #3+ market share in growth market

13

CIENA’s Expansion into Service DeliveryCIENA’s Expansion into Service Delivery

Estimated Global Market Opportunity from Recent Acquisitions

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

2003 2004 2005 2006 2007

$ (M

illio

ns)

Wavesmith Akara Internet Photonics Catena

Sources include: Yankee Group, April 2004; Infonetics, May 2004; IDC, January 2004; RHK, March 2004; and CIENA internal estimates.

Sources include: Yankee Group, April 2004; Infonetics, May 2004; IDC, January 2004; RHK, March 2004; and CIENA internal estimates.

(June 2003) (Sept 2003) (May 2004) (May 2004)

14

DN™ SeriesCatena

Internet Photonics

PacketWave™ (Luminous)PacketWave™ (Luminous)

ST™ (Laurel)

Core Network

CoreDirector™

Metro Network

MetroDirectorK2™

Access Network

CN 2600(formerly ONLINE Edge)

CN 2600(formerly ONLINE Edge)

ONLINE™ Metro

Voice/video/DSL Services

VoD/HDTVServices

MPLS/ATM/FRServices

IPServices

Private LineServices

StorageServices

EthernetServices

CN™ 2000

Laurel PartnershipSept 2003

Luminous PartnershipSept 2003

CoreStream™Agility

Capturing Services RevenueCapturing Services Revenue

15

Layer 2/3Layer 2/3

Layer 1/2Layer 1/2

Layer 2/3Layer 2/3

Bundled Service Delivery To Large Enterprises (Service Provider Case)Bundled Service Delivery To Large Enterprises (Service Provider Case)

ServiceService

Large Enterprise

Large Enterprise

End-UserEnd-User NetworkNetwork

CN1000CN1000

ConvergedMulti-service

Core


Core

PL

FR

Ethernet

IP VPN

Storage

ATM

PL

FR

Ethernet

IP VPN

Storage

ATM

ResidenceResidence

Small & Medium Enterprise


VoiceVoice

VideoVideo

Internet AccessInternet Access

SLC-5SLC-5CNX-5CNX-5

Note: services also enabled by CoreDirector, CoreStream Agility, and ONLINE MetroNote: services also enabled by CoreDirector, CoreStream Agility, and ONLINE Metro

Improved margins on storage & ethernet services• Economical sub-rate storage over anything (CN2000)• Economical metro ethernet (CN 4310)

Deliver high-value managed storage services• Enhanced service monitoring & demarcation (CN2000)

Improved margins on storage & ethernet services• Economical sub-rate storage over anything (CN2000)• Economical metro ethernet (CN 4310)


ST 200ST 200

CN 2600CN 2600

CN 4310CN 4310

CN 4310CN 4310

16

Layer 2/3Layer 2/3

Layer 1/2Layer 1/2


Core


Core

Cable ModemCable

ModemHeadendHeadend

VOD Server Cluster

HubHub

QAM

CMTSCMTS

ResidenceResidence

ServiceService End-UserEnd-User NetworkNetwork

VoiceVoice

VideoVideo

Internet AccessInternet Access

CN 4300CN 4300

Set-TopSet-Top

Bundled Service Delivery To Residential Consumers (MSO Case)Bundled Service Delivery To Residential Consumers (MSO Case)

PL

Ethernet

PL

Ethernet



Improved margins on storage & ethernet services• Economical sub-rate storage over anything (CN2000)• Economical metro ethernet (IPI 4300)


Improved margins on storage & ethernet services• Economical sub-rate storage over anything (CN2000)• Economical metro ethernet (IPI 4300)


Large Enterprise

Large Enterprise

IP VPN

Storage

IP VPN

Storage

CN 2300CN 2300

17

CIENA’s Solutions Portfolio – Core to DoorCIENA’s Solutions Portfolio – Core to Door

Core Transport & Switching


Multiservice Edge Switching


Broadband Access

Broadband Access

Multiservice Access

Multiservice Access

Metro Transport & Switching


18

CIENA’s Solutions Portfolio – Core to DoorCIENA’s Solutions Portfolio – Core to Door





Broadband Access

Broadband Access

Multiservice Access

Multiservice Access



10000 Series

7000 Series

2000 Series

DN™ 7000, DN 7050,DN 7100, DN 7200

CoreDirector™CoreStream™

CoreDirector CICoreStream Agility

CN 2000, CN 2100, CN 2110, CN 2130, CN 2200, CN 2300,

CN 2600

CN 4300, CN 4310, ONLINE™ MetroMetroDirector K2™

4000 Series

1000 SeriesCNX 5, CN™ 1000

19

CIENA’s Transformation: Beyond the Product PortfolioCIENA’s Transformation: Beyond the Product Portfolio

• Shifting investment focus from core to access/service delivery

– Committed to maintaining technology leadership in the core

– Leveraging 2002-2003 investments:• CoreStream Agility, new core transport platform won Gig-BE and MCI

• Enhanced CoreDirector features/functionality

• Anticipate exceeding previous cost reduction goals

– Expected 10% to 20% ongoing opex reduction in FY ’04.

– Now expect cost savings will be ~30%

20

Focused Cost Reduction Focused Cost Reduction

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000Q

1'0

2

Q2

'02

Q3

'02

Q4

'02

Q1

'03

Q2

'03

Q3

'03

Q4

'03

Q1

'04

Q2

'04

Q3

'04

Q4

'04

Q1

‘0

5

Guidance

G&A

S&M

R&D

$90-$94m

$65-$70m

25%

1st full qtr of ONI-related expenses

21


$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000Q

1'0

2

Q2

'02

Q3

'02

Q4

'02

Q1

'03

Q2

'03

Q3

'03

Q4

'03

Q1

'04

Q2

'04

Q3

'04

Q4

'04

Q1

'05

Guidance

G&A

S&M

R&D

$90-$94m

$65-$70m

35%

1st full qtr of Catena & IPI expenses

22


$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000Q

1'0

2

Q2

'02

Q3

'02

Q4

'02

Q1

'03

Q2

'03

Q3

'03

Q4

'03

Q1

'04

Q2

'04

Q3

'04

Q4

'04

Q1

'05

Guidance

G&A

S&M

R&D

Up to 44%

23

CIENA’s Transformation: Beyond the Product PortfolioCIENA’s Transformation: Beyond the Product Portfolio

• Manufacturing nearly 100% outsourced

– Currently working to consolidate contract manufacturers

• Services business restructured to profitability

• Sales force revamped to include skills/experience required for broader portfolio

• 30+ channel partners developed to target enterprise opportunities/new geographies

• Shifting investment focus from core to access/service delivery

– Committed to maintaining technology leadership in the core

– Leveraging 2002-2003 investments:• CoreStream Agility, new core transport platform won Gig-BE and MCI

• Enhanced CoreDirector features/functionality

• Anticipate exceeding previous cost reduction goals

– Expected 10% to 20% ongoing opex reduction in FY ’04.

– Now expect cost savings will be ~30%

24

CIENA’s Strong Cash PositionCIENA’s Strong Cash Position

Q2 ‘04Q2 ‘04

Cash & Cash Equiv Balance:Cash & Cash Equiv Balance: $1.5 billion$1.5 billion

Cash used in Q2 ’04:Cash used in Q2 ’04: $60 million$60 million

Operating cash:Operating cash: ~$60-$65 million~$60-$65 million

Short-term quarterly cash use target: $50-$70 millionShort-term quarterly cash use target: $50-$70 million

Long-term DebtLong-term Debt

$690 million 3.75% converts due 2008 $690 million 3.75% converts due 2008

Q3 ’04 Expected Cash UseQ3 ’04 Expected Cash Use

Expected Deal & Restructuring cash use:Expected Deal & Restructuring cash use: ~$25 million~$25 million

25

Transforming CIENA to Encompass Broadband Service DeliveryTransforming CIENA to Encompass Broadband Service Delivery

CAPEX/OPEX Savings

From (2003)From (2003)

High Quality/Low Volumes

Direct Sales Only

Service Revenues

Low Cost/High Volumes

Channels/Enterprise Pull

Value PropositionValue Proposition

CompetenciesCompetencies

Core Optical Broadband Edge & AccessTechnologiesTechnologies

FY ’02$361 million




Core NetworkingCore Networking

Metro NetworkingMetro Networking

Data Networking/Service Delivery

Data Networking/Service Delivery

Solutions & SoftwareSolutions & Software

Service/Tech SupportService/Tech Support

FY ’01$1.6 billion

FY ’01$1.6 billion

FY ’04(stated goal

prior to Catena & IPI)

FY ’04(stated goal

prior to Catena & IPI)

To Include (2005)To Include (2005)

T.B.D.T.B.D.

Thank You!Thank You!

Documents

Tom Mock Sr. Vice President, Strategic Planning June 3, 2004 Tom Mock Sr. Vice President, Strategic Planning June 3, 2004 Friedman Billings Ramsey 8 th