CIENA Reports Fiscal 1998 Revenue of $508.1 Million, Net Income of $0.77 per Share, Exclusive of One-Time Charges.

LINTHICUM, Md.--(BUSINESS WIRE)--Dec. 10, 1998--CIENA Corporation (NASDAQ:CIEN) today reported revenue for the fiscal year ended October 31, 1998 of $508.1 million, compared to revenue of $413.2 million reported for fiscal 1997.(1) Excluding the effect of one-time charges associated with purchased research and development, litigation and merger costs, net income for the year was $83.2 million, or $0.77 per share compared to $120.5 million or $1.15 per share for the same period a year ago.(1)

Revenue for the fourth quarter of fiscal 1998 totaled $91.2 million as compared to revenue of $130.1 million for the same period in 1997. Excluding the effect of charges related to the proposed merger with Tellabs, the Company reported a net loss for the quarter of $3.6 million, or $0.03 per share, compared to net income of $39.5 million, or $0.37 per share, for the fourth fiscal quarter of 1997, exclusive of charges associated with the Pirelli litigation.(1) The Company's results for the fourth fiscal quarter were slightly better than First Call consensus expectations for the period.

CIENA continued to make progress toward its goal of diversifying its customer base, recognizing revenue during the quarter from a record 14 customers, including two new announced customers: DDI in Japan purchased CIENA's 16-channel MultiWave Sentry(tm) system, while Enron Communications selected the 40-channel MultiWave Sentry system as the transport equipment for its new Pure IP(sm) backbone network.

"Traditional equipment suppliers have realized the optical transport layer represents a key strategic beachhead in the data network revolution and that market share and footprint in this emerging space will be critical," said Patrick Nettles, CIENA's president and chief executive officer. "During the last several quarters we've seen the competition turn to one of the only levers they have to attempt to gain share from CIENA - price. Our gross margins in the fourth quarter reflect that pricing pressure, as well as what we believe will be a short-term impact of underutilized manufacturing capacity."

In a separate release today, CIENA disclosed the findings of a wavelength division multiplexing (WDM) market analysis done by international telecommunications researcher, Ovum. Based on Ovum's findings, which were consistent with CIENA's internal market research, CIENA claimed approximately 38 percent of the estimated $1.2 billion worldwide WDM market in 1998. CIENA estimates its share of the dense wavelength division multiplexing (DWDM, or 16-channel and greater) systems market is significantly larger.

"Ovum's findings, and those of other industry analysts suggest that CIENA is effectively competing on a global basis with the larger suppliers," said CIENA's Nettles. "It's our goal to win every deal, but ultimately, there will be those we don't. We're encouraged that collectively, industry analysts expect the overall WDM market to continue to grow, with room for a number of players."

The Company also disclosed that a blind survey of service providers conducted on behalf of the Company by Yankelovich Partners, Inc., showed a high degree of customer recognition and satisfaction with CIENA and its MultiWave(R) products. In the survey, CIENA was rated best among competing equipment suppliers for overall service and support. Survey participants also rated CIENA the easiest supplier to work with. "From the start, CIENA has believed that customers value quick response and superior service and support. We're pleased that the Yankelovich findings validate our commitment in those areas," stated Nettles.

Nettles offered the following comments relative to CIENA's forward-looking expectations: "Overall bid activity suggests that the demand for bandwidth remains robust, however, as has been typical of our business at the end of a calendar year, there is limited visibility much beyond the current quarter. While it appears that CIENA may be on track to resume modest sequential revenue growth in the first fiscal quarter, we continue to encourage conservative expectations."

"Pursuit of our strategy to preserve and enhance our market leadership, combined with continued investment in selling, marketing and customer service activities, as well as in ongoing product development, will likely limit our operating profitability during at least the first half of fiscal 1999 and may result in near-term operating losses," Nettles concluded. "We firmly believe that successfully securing footprint and market share now will better position CIENA for longer-term growth."

NOTE TO INVESTORS:

Forward-looking statements in this release, including statements regarding (1) belief that the impact of unabsorbed manufacturing overhead will be short-term, (2) the resumption of modest sequential growth during the fiscal first quarter and, (3) pursuit of a strategy to preserve and enhance market leadership, combined with continued investment in selling, marketing and customer service activities, as well as in ongoing product development likely limiting profitability and possibly resulting in near-term operating losses 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 by such forward-looking statements, due to risks and uncertainties associated with the Company's business. The forward-looking statements should be considered in the context of these and other risk factors disclosed in the Company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on December 10, 1998.

ABOUT CIENA

Based in Linthicum, Maryland, CIENA Corporation is a worldwide market leader of open architecture, dense wavelength division multiplexing (DWDM) systems for long-distance and local exchange carriers. CIENA's DWDM solutions include the MultiWave(R) 1600 long-haul transport system, WaveWatcher(R) network management software, the MultiWave Optical Add/Drop Multiplexer, the MultiWave Sentry(tm) enhanced long-distance transport system and the new MultiWave(R) Firefly and MultiWave Metro(tm) short-haul systems. Through its Alta subsidiary, based near Atlanta, GA, CIENA provides a range of engineering, furnishing and installation (EF&I) services for telecommunications service providers in the areas of transport, switching and wireless communications. Additional information about CIENA can be found on its World Wide Website: http://www.ciena.com.

"Pure IP" is a service mark of Enron Communications

CIENA Corporation
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

                                       October 31,        October 31
                                          1997               1998
  ASSETS
Current assets:
  Cash and cash equivalents            $ 268,588         $ 227,397
  Marketable debt securities                 -              15,993
  Accounts receivable, net                72,336            85,472
  Inventories, net                        41,109            70,908
  Deferred income taxes                    9,139            15,301
  Prepaid income taxes                       -               8,558
  Prepaid expenses and other               3,093             4,415
    Total current assets                 394,265           428,044
Equipment, furniture and fixtures, net    67,618           123,405
Goodwill and other intangible assets,
 net                                           5            16,270
Other assets                               1,391             4,705
    Total assets                       $ 463,279         $ 572,424

  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                    $   24,760        $   25,686
  Accrued liabilities                     32,022            34,328
  Income taxes payable                       261                 -
  Deferred revenue                         2,591             1,084
  Other current obligations                1,179               838
    Total current liabilities             60,813            61,936
Deferred income taxes                     28,167            34,125
Other long-term obligations                1,885             1,414
    Total liabilities                     90,865            97,475
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;
    100,287,653 and 103,239,704 shares
     issued and outstanding                 1,003             1,032
  Additional paid-in capital              245,219           294,926
  Notes receivable from stockholders          (64)             (357)
  Translation adjustment                       (5)             (107)
  Retained earnings                       126,261           179,455
    Total stockholders' equity            372,414           474,949
    Total liabilities and
     stockholders' equity               $ 463,279         $ 572,424


CIENA Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)


                            Quarter Ended          Fiscal Year Ended
                        October 31, October 31,  October 31, October 31,
                          1997       1998          1997         1998

Revenue              $  130,094    $ 91,161    $  413,215 $  508,087
Cost of goods sold       50,250      62,688       166,472    256,014
  Gross profit           79,844      28,473       246,743    252,073

Operating expenses:
  Research and
   development            8,314      18,880        23,308     64,536
  Selling and
    marketing             7,889      12,407        22,627     45,945
  General and
   administrative         3,782       5,677        11,823     17,825
  Purchased research
   and development            -           -             -      9,503
  Pirelli litigation      2,500           -         7,500     30,579

  Merger costs                -         531             -      2,548
   Total operating
    expenses             22,485      37,495        65,258    170,936

Income (loss) from
 operations              57,359      (9,022)      181,485     81,137

Interest and other
 income, net              3,700       2,768         7,593     12,551

Interest expense            (89)        (36)         (408)      (259)

Income before
 income taxes            60,970      (6,290)      188,670     93,429

Provision (benefit)
 for income taxes        23,062      (2,392)       72,703     40,235

Net income           $   37,908    $ (3,898)   $  115,967 $   53,194

Basic net income
 per common share    $     0.38    $  (0.04)   $     1.53 $     0.52

Diluted net income
 per common share
 and dilutive
 potential
 common share        $     0.35    $  (0.04)   $     1.11 $     0.49

Weighted average
 basic common
 shares                  99,786     102,914        75,802    101,751


Weighted average
 basic common and
 dilutive potential
 common share           107,308     102,914       104,664    107,895

(1) Past financial results have been restated to reflect the

consolidated results of Alta Telecom, Inc., acquired by CIENA on

February 19, 1998. In addition, net income and earnings per share

amounts reported in the attached consolidated statement of

operations are inclusive of the effects of one-time charges and

litigation expenses. All earnings per share amounts represent

diluted earnings per share as defined within Statement of Financial

Accounting Standards No. 128 (SFAS 128).