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CIENA Reports Fourth Quarter and Fiscal Year 2002 Results; Commences Tender Offer to Repurchase Remaining Outstanding 5% ONI Notes

December 12, 2002

LINTHICUM, Md., Dec 12, 2002 (BUSINESS WIRE) -- CIENA(R) Corporation (NASDAQ:CIEN) today reported revenue of $61.9 million for its fourth fiscal quarter ended October 31, 2002. Under GAAP, CIENA's reported net loss for the period was $754.8 million, or a net loss of $1.75 per share.

The quarter's results include charges for a goodwill impairment of $557.3 million, restructuring charges of $78.7 million associated with workforce reductions, lease terminations, non-cancelable lease costs and the write-down of certain property, equipment and leasehold improvements, deferred stock compensation charges of $5.7 million, amortization of intangible assets of $3.0 million, a charge for settlement of litigation with Pirelli of $1.8 million, losses on equity investments of $9.9 million, and a $2.7 million loss related to the repurchase and early extinguishment of $97.1 million of the $300 million outstanding 5% convertible subordinated notes due in 2005 assumed in the purchase of ONI Systems. In addition, CIENA recorded a charge of $1.6 million related to excess inventory.

"Despite a challenging year, our ongoing operating results in our fiscal fourth quarter show the positive effects of the steps taken across our company over the last year to align our business with a changed environment," said Gary Smith, CIENA's president and CEO. "During the quarter we grew our revenue, improved gross margins and delivered lower-than-anticipated ongoing operating expenses."

For its 2002 fiscal year, CIENA reported revenue of $361.2 million. Under GAAP, CIENA's reported net loss for the period was $1,597.5 million, or a net loss of $4.37 per share.

The year's results include charges for a goodwill impairment of $557.3 million, restructuring costs of $225.4 million associated with workforce reductions, lease terminations, non-cancelable lease costs and the write-down of certain property, equipment and leasehold improvements, deferred stock compensation charges of $20.3 million, a provision for doubtful accounts of $14.8 million, amortization of intangible assets of $9.0 million, a charge for settlement of litigation with Pirelli of $1.8 million, losses on equity investments of $15.7 million, and a $2.7 million loss related to the repurchase and early extinguishment of $97.1 million of the $300 million outstanding ONI 5% convertible subordinated notes due in 2005. In addition, CIENA recorded a charge of $286.5 million, primarily related to excess inventory associated with its long-haul transport products and non-cancelable purchase commitments with suppliers.

In evaluating the operating performance of its business, CIENA's management excludes certain charges or credits that are required by GAAP. These items, which are identified in the table below, 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 the Company's control.

                                    Quarter Ended      Fiscal Yr Ended
                                 October 31, 2002     October 31, 2002
Item                               (in thousands)       (in thousands)
                                   --------------       --------------

Payroll tax on stock options       $            -       $           38
Deferred stock compensation costs           5,740               20,324
Amortization of intangible assets           3,003                8,972
Restructuring costs                        78,691              225,429
Goodwill impairment                       557,286              557,286
Pirelli litigation                          1,792                1,792
Provision for doubtful accounts                 -               14,813
Loss on equity investments                  9,937               15,677
Loss on extinguishment of debt              2,683                2,683
Income tax effect of excluding
 items above                               32,493              334,661
                                   --------------       --------------
                                   $      691,625       $    1,181,675

Note: Please see Appendix A for additional information about this
table.

These adjustments are not in accordance with GAAP and making such adjustments may not permit meaningful comparisons to other companies. As of the quarter ended October 31, 2002, CIENA's weighted average shares outstanding were approximately 431,257,000. As of the fiscal year ended October 31, 2002, CIENA's weighted average shares outstanding were approximately 365,202,000.

Debt Repurchase

During the fourth quarter of fiscal 2002, CIENA took steps to improve its already strong balance sheet. The Company saved $21.9 million in future principal payment by purchasing $97.1 million of the $300 million outstanding ONI 5% convertible subordinated notes due in 2005 for $75.2 million on the open market. At the time of purchase, these notes had an accreted book value of $72.5 million.

In addition, CIENA today announced that it has commenced a tender offer for the outstanding 5% Convertible Subordinated Notes due October 15, 2005 originally issued by ONI Systems Corp. and assumed by CIENA in its acquisition of ONI in June 2002. CIENA's purpose in seeking to repurchase the notes is to reduce its annual interest expense and eliminate the need to repay or refinance the debt at maturity in 2005. The tender offer is not contingent on any financing. The notes are currently convertible into CIENA common stock at a conversion rate of approximately 7.7525 shares per $1,000 principal amount held, subject to adjustment. The purchase price for the notes will be $860.00 in cash per $1,000 principal amount, plus accrued and unpaid interest up to, but not including, the date of payment.

Holders that desire to tender their notes pursuant to the offer must follow the procedures described in the Offer to Purchase and other related documents to be filed by CIENA with the Securities and Exchange Commission. These documents will be mailed to the registered holders of the notes. The tender offer will expire at 5:00 p.m., New York City time, on January 13, 2003, unless the offer is extended.

Goldman, Sachs & Co. will act as the dealer managers for the tender offer and State Street Bank and Trust Company of California, N.A. will act as depositary. Requests for copies of the Offer to Purchase and additional information concerning the terms of the tender offer or questions about the offer may be directed to Goldman, Sachs & Co., at 85 Broad Street, New York City, New York 10004, Attn: Prospectus Department, Telephone: (212) 902-1000 or to the information agent for the tender offer, Georgeson Shareholder, 17 State Street, 10th Floor, New York, New York 10004, Telephone: (866) 295-4322.

If the Company successfully purchases all of the $202.9 million outstanding ONI 5% notes at $860 per $1,000 principal amount, it will save approximately $28.4 million in future principal payment and will record a book loss of approximately $18.7 million related to the extinguishment of this debt due to the fact that the accreted book value of the notes will be less than the purchase price. The Company will use its cash and cash equivalents, and short-term investments to fund the note purchase.

Business Outlook

"We are encouraged by the order activity we have seen thus far in our fiscal first quarter and expect that revenue in the quarter could increase by as much as 10 percent from our fiscal 2002 fourth quarter," said Smith. "In addition, we expect to make continued progress toward profitability through our ongoing efforts to improve gross margin and to lower ongoing operating expenses."

"The telecom equipment market has changed radically in just the last 12 months," continued Smith. "While challenging, this change has created opportunity for those positioned to pursue it. CIENA's financial strength and our commitment to continued investment in our business differentiates us from our competitors, many of whom are experiencing financial and directional uncertainty."

"As a result, we believe CIENA has an opportunity to achieve growth in 2003 despite decreased carrier spending," concluded Smith. "In addition to working toward increased market share, we are pursuing feature additions and product extensions, and developing new sales channels, to increase our addressable market."

Live Web Broadcast of Q4 and Fiscal Year 2002 Results

CIENA will host a discussion of its fiscal fourth quarter and fiscal year 2002 results with investors and financial analysts on Thursday, December 12, 2002 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: www.CIENA.com/investors.

NOTE TO CIENA INVESTORS

This press release contains certain forward-looking statements based on current expectations, forecasts and assumptions of CIENA (the Company) that involve risks and uncertainties. Forward-looking statements in this release, including if the Company successfully purchases all of the $202.9 million outstanding 5% notes at $860 per $1,000 principal amount, it will save approximately $28.4 million in future principal payment and will record a book loss of approximately $18.7 million related to the extinguishment of this debt due to the fact that the accreted book value of the notes will be less than the purchase price, the Company will use its cash and cash equivalents, and short-term investments to fund the note purchase, we are encouraged by the order activity we have seen thus far in our fiscal first quarter and expect that revenue in the quarter could increase by as much as 10 percent from our fiscal 2002 fourth quarter, in addition, we expect to make continued progress toward profitability through our ongoing efforts to improve gross margin and to lower ongoing operating expenses, the telecom equipment market has changed radically in just the last 12 months, while challenging, this change has created opportunity for those positioned to pursue it, CIENA's financial strength and our commitment to continued investment in our business differentiates us from our competitors, many of whom are experiencing financial and directional uncertainty, as a result, we believe CIENA has an opportunity to achieve growth in 2003 despite decreased carrier spending, in addition to working toward increased market share, we are pursuing feature additions and product extensions, and developing new sales channels, to increase our addressable market, are based on information available to the Company as of the date hereof. The Company's actual results could differ materially from those stated or implied in such forward-looking statements, due to risks and uncertainties associated with the Company's business, which include the risk factors disclosed in the Company's Report on Form 10-K filed with the Securities and Exchange Commission on December 12, 2002. Forward-looking statements include statements regarding the Company'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. The Company assumes no obligation to update the information included in this press release, whether as a result of new information, future events or otherwise.

THIS PRESS RELEASE IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SECURITIES. CIENA PLANS TO FILE A SCHEDULE TO (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER TENDER OFFER DOCUMENTS) TODAY WITH THE SEC WITH REGARD TO ITS OFFER TO PURCHASE THE NOTES.

SECURITY HOLDERS ARE URGED TO READ THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS TO BE FILED BY CIENA WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. THE OFFER TO PURCHASE, RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS FILED WITH THE SEC BY CIENA MAY BE OBTAINED WHEN THEY BECOME AVAILABLE FOR FREE AT THE SEC'S WEB SITE, WWW.SEC.GOV. REQUESTS FOR COPIES OF THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND THE OTHER TENDER OFFER DOCUMENTS OR QUESTIONS ABOUT THE OFFER MAY BE DIRECTED TO THE DEALER MANAGERS FOR THE OFFER, GOLDMAN, SACHS & CO., AT 85 BROAD STREET, NEW YORK CITY, NEW YORK 10004, ATTN: PROSPECTUS DEPARTMENT, TELEPHONE: (212) 902-1000 OR THE INFORMATION AGENT FOR THE OFFER, GEORGESON SHAREHOLDER, 17 STATE STREET, 10TH FLOOR, NEW YORK, NEW YORK 10004, TELEPHONE: (866) 295-4322.

                          CIENA CORPORATION
                     CONSOLIDATED BALANCE SHEETS
                  (in thousands, except share data)
                                                    October 31,
                                              -----------------------
                                                  2001        2002
                                              ----------- -----------
                    ASSETS
Current assets:
  Cash and cash equivalents                     $397,890    $377,189
  Short-term investments                         902,594   1,130,414
  Accounts receivable, net                       395,063      28,680
  Inventories, net                               254,968      47,023
  Deferred income taxes                          186,861           -
  Prepaid expenses and other                      53,713      54,351
                                              ----------- -----------
     Total current assets                      2,191,089   1,637,657
Long-term investments                            494,657     570,861
Equipment, furniture and fixtures, net           331,490     196,951
Goodwill                                         178,891     212,500
Other intangible assets, net                      47,874      62,457
Other long-term assets                            73,300      70,596
                                              ----------- -----------
    Total assets                              $3,317,301  $2,751,022
                                              =========== ===========

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                               $68,735     $39,841
  Accrued liabilities                            133,084     132,588
  Restructuring liabilities                       15,439      27,423
  Unfavorable lease commitments                        -       7,630
  Income taxes payable                             6,649           -
  Deferred revenue                                29,480      15,388
  Other current obligations                          995         948
                                              ----------- -----------
     Total current liabilities                   254,382     223,818
  Deferred income taxes                           64,072           -
  Long-term deferred revenue                           -      15,444
  Long-term restructuring liabilities                  -      65,742
  Long-term unfavorable lease commitments              -      70,124
  Other long-term obligations                      5,982       5,009
  Convertible notes payable                      863,883     843,616
                                              ----------- -----------
     Total liabilities                         1,188,319   1,223,753
                                              ----------- -----------
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; 
   980,000,000 shares authorized;
   328,022,264 and 432,842,481 
   shares issued and outstanding                   3,280       4,328
  Additional paid-in capital                   3,667,512   4,658,882
  Notes receivable from stockholders              (3,236)     (3,866)
  Accumulated other comprehensive income           4,842       8,840
  Accumulated deficit                         (1,543,416) (3,140,915)
                                              ----------- -----------
     Total stockholder's equity                2,128,982   1,527,269
                                              ----------- -----------
  Total liabilities and stockholders' equity  $3,317,301  $2,751,022
                                              =========== ===========


                           CIENA CORPORATION
                    CONSOLIDATED INCOME STATEMENTS
            (in thousands, except share and per share data)
                              (Unaudited)

                         Quarter Ended             Years Ended
                           October 31,              October 31,
                     ----------------------- -------------------------
                        2001        2002        2001         2002
                     ------------ ---------- ------------ ------------

Revenue                 $367,774    $61,918   $1,603,229     $361,155
Excess and obsolete
 inventory costs          16,586      1,592       68,411      286,475
Cost of goods sold       204,968     51,801      836,138      309,559
                     ------------ ---------- ------------ ------------
  Gross profit
   (loss)                146,220      8,525      698,680     (234,879)
                     ------------ ---------- ------------ ------------
Operating Expenses
  Research and
   development (1)        73,195     61,355      235,831      239,619
  Selling and
   marketing (2)          38,909     32,012      146,949      130,276
  General and
   administrative
   (3)                    15,143     13,091       57,865       50,820
  Deferred stock
   compensation costs     16,401      5,740       41,367       20,324
  Amortization of
   goodwill               75,873          -      177,786            -
  Amortization of
   intangible assets       1,922      3,003        4,413        8,972
  In-process research
   and development             -          -       45,900            -
  Restructuring
   costs                  15,439     78,691       15,439      225,429
  Goodwill
   impairment          1,719,426    557,286    1,719,426      557,286
  Pirelli litigation           -      1,792            -        1,792
  Provision for
   doubtful accounts           -          -       (6,579)      14,813
                     ------------ ---------- ------------ ------------
     Total
      operating
      expenses         1,956,308    752,970    2,438,397    1,249,331
                     ------------ ---------- ------------ ------------
Loss from operations  (1,810,088)  (744,445)  (1,739,717)  (1,484,210)
Interest and other
 income (expense),
 net                      18,756     16,370       63,579       61,145
Interest expense         (12,098)   (15,583)     (30,591)     (45,339)
Loss on equity
 investments, net              -     (9,937)           -      (15,677)
Loss on
 extinguishment of
 debt                          -     (2,683)           -       (2,683)
                     ------------ ---------- ------------ ------------
Income (loss) before
 income taxes         (1,803,430)  (756,278)  (1,706,729)  (1,486,764)
Provision (benefit)
 for income taxes         (1,148)    (1,508)      87,333      110,735
                     ------------ ---------- ------------ ------------
Net income (loss)    $(1,802,282) $(754,770) $(1,794,062) $(1,597,499)
                     ============ ========== ============ ============

Basic net income
 (loss) per common
 share                    $(5.51)    $(1.75)      $(5.75)      $(4.37)
                     ============ ========== ============ ============
Diluted net income
 (loss) per common
 and
  dilutive potential
   common share           $(5.51)    $(1.75)      $(5.75)      $(4.37)
                     ============ ========== ============ ============
Weighted average
 basic common shares
  outstanding            326,834    431,257      311,815      365,202
                     ============ ========== ============ ============
Weighted average
 basic common and
 dilutive
  potential common
   shares outstanding    326,834    431,257      311,815      365,202
                     ============ ========== ============ ============

(1) Exclusive of $9,647, $4,396, $17,783 and $15,672 deferred stock
    compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002
    and years ended Oct. 31, 2001 and Oct. 31, 2002, respectively.

(2) Exclusive of $959, $911, $8,378 and $3,560 deferred stock
    compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002
    and years ended Oct. 31, 2001 and Oct. 31, 2002, respectively.

(3) Exclusive of $5,795, $433, $15,206 and $1,092 deferred stock
    compensation costs for quarters ended Oct. 31, 2001, Oct. 31, 2002
    and years ended Oct. 31, 2001 and Oct. 31, 2002, respectively.

Appendix A

The adjustments management makes in analyzing CIENA's fourth quarter and fiscal year GAAP results are as follows:

-- Payroll tax on stock options - an uncontrollable expense, largely unrelated to normal operations, that fluctuates significantly depending largely on the price of our stock and the magnitude of option exercises in a given period. -- Deferred stock compensation costs - a non-cash expense largely unrelated to normal operations, and which arises under GAAP accounting from the assumption of unvested stock options issued by any companies we acquire, including Cyras and ONI. -- Amortization of intangible asset - a non-cash expense unrelated to normal operations arising from acquisitions of intangible assets, principally developed technology acquired in the Cyras and ONI acquisitions which CIENA is required to amortize over its expected useful life. -- Restructuring costs - non-recurring charges, unrelated to normal operations, incurred as a result of reducing the size of the Company's operations to align its resources with the reduced size of the telecommunications market. -- Goodwill impairment - a non-cash expense unrelated to normal operations. -- Pirelli litigation - a non-recurring expense, unrelated to normal operations. -- Provision for doubtful accounts - non-recurring charges that are outside of the Company's control that arise when our customers' ability to pay is in doubt. In recent periods primarily related to the financial health of service provider customers. -- Loss on equity investments - a decline in the fair market value of an equity investment that is determined to be other-than-temporary. -- Loss on debt extinguishment - a non-recurring expense, unrelated to normal operations. -- Income tax effect - the income tax charge or benefit on the adjusted net loss, which is a necessary adjustment for consistency.

About CIENA

CIENA Corporation's market-leading intelligent optical networking systems form the core for the new era of networks and services worldwide. CIENA's LightWorks(TM) architecture enables next-generation optical services and changes the fundamental economics of service-provider networks by simplifying the network and reducing the cost to operate it. Additional information about CIENA can be found at www.CIENA.com.

CIENA Corporation

CONTACT:          CIENA Corporation
                  Investor Contacts:
                  Suzanne DuLong or Jessica Towns, 888/243-6223
                  E-mail: ir@ciena.com
                  or
                  Press Contacts:
                  Denny Bilter or Glenn Jasper, 877/857-7377
                  E-mail: pr@ciena.com

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SOURCE: CIENA Corporation

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