SEGMENTS AND ENTITY WIDE DISCLOSURES | SEGMENTS AND ENTITY WIDE DISCLOSURES Segment Reporting Ciena’s internal organizational structure and the management of its business are grouped into the following operating segments: • Networking Platforms reflects sales of Ciena’s Converged Packet Optical, Packet Networking and Optical Transport product lines . ◦ Converged Packet Optical — includes the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, which feature Ciena's WaveLogic coherent optical processors. Products also include the Waveserver stackable interconnect system, the family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform. ◦ Packet Networking — includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform and the Ethernet packet configuration for the 5410 Service Aggregation Switch. ◦ Optical Transport — includes the 4200 Advanced Services Platform, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL) and 6100 Multiservice Optical Platform. Ciena's Optical Transport products have either been previously discontinued, or are expected to be discontinued during fiscal 2017, reflecting network operators' transition toward next-generation converged network architectures. The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Condensed Consolidated Statement of Operations. • Software and Software-Related Services reflects sales of Ciena’s network virtualization, management, control and orchestration software solutions and software-related services, including subscription, installation, support, and consulting services. ◦ This segment includes Ciena’s element and network management solutions and planning tools, including the OneControl Unified Management System, ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. As Ciena seeks adoption of its Blue Planet software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other element and network management solutions. ◦ This segment includes Ciena’s Blue Planet network virtualization, service orchestration and network management software platform. Ciena's Blue Planet platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), and Ciena's manage, control and plan (MCP) solution, SDN Multilayer Controller and V-WAN application. Revenue from the software platforms portion of this segment is included in product revenue on the Condensed Consolidated Statement of Operations. Revenue from software-related services is included in services revenue on the Condensed Consolidated Statement of Operations. • Global Services reflects sales of a broad range of Ciena’s services for consulting and network design, installation and deployment, maintenance support and training activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statement of Operations. Ciena's long-lived assets, including equipment, building, furniture and fixtures, finite-lived intangible assets and maintenance spares, are not reviewed by the chief operating decision maker for purposes of evaluating performance and allocating resources. As of July 31, 2017 , equipment, building, furniture and fixtures, net totaled $314.9 million primarily supporting asset groups within Ciena's Networking Platforms and Software and Software-Related Services segments and supporting Ciena's unallocated selling and general and administrative activities. As of July 31, 2017 , $40.4 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Networking Platforms segment and $66.6 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Software and Software-Related Services segment. As of July 31, 2017 , all of the maintenance spares, net, totaling $46.6 million , were assigned to asset groups within Ciena's Global Services segment. Segment Revenue The table below (in thousands) sets forth Ciena’s segment revenue for the respective periods: Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Revenue: Networking Platforms Converged Packet Optical $ 506,532 $ 467,615 $ 1,421,315 $ 1,291,956 Packet Networking 82,121 63,658 220,641 180,437 Optical Transport 3,694 9,619 11,822 30,215 Total Networking Platforms 592,347 540,892 1,653,778 1,502,608 Software and Software-Related Services Software Platforms 18,395 12,558 48,587 32,409 Software-Related Services 23,856 19,011 70,760 55,059 Total Software and Software-Related Services 42,251 31,569 119,347 87,468 Global Services Maintenance Support and Training 57,902 55,996 171,133 169,123 Installation and Deployment 27,397 31,245 84,011 92,317 Consulting and Network Design 8,822 10,848 28,969 32,866 Total Global Services 94,121 98,089 284,113 294,306 Consolidated revenue $ 728,719 $ 670,550 $ 2,057,238 $ 1,884,382 Segment Profit (Loss) Segment profit (loss) is determined based on internal performance measures used by the chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; amortization of intangible assets; acquisition and integration costs; restructuring costs; interest and other income (loss), net; interest expense; and provisions for income taxes. The table below (in thousands) sets forth Ciena’s segment profit (loss) and the reconciliation to consolidated net income during the respective periods indicated: Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 Segment profit (loss): Networking Platforms $ 159,649 $ 150,521 $ 423,859 $ 390,109 Software and Software-Related Services 11,133 2,412 23,384 (970 ) Global Services 39,565 38,855 116,637 114,543 Total segment profit 210,347 191,788 563,880 503,682 Less: Non-performance operating expenses Selling and marketing 86,739 83,732 260,292 252,878 General and administrative 35,569 34,336 106,423 100,681 Amortization of intangible assets 3,837 14,529 29,368 46,957 Acquisition and integration costs — 1,029 — 4,613 Restructuring costs 2,203 1,138 8,874 2,057 Add: Other non-performance financial items Interest expense and other income (loss), net (14,263 ) (19,614 ) (45,322 ) (52,741 ) Less: Provision for income taxes 7,726 3,864 11,704 7,758 Consolidated net income $ 60,010 $ 33,546 $ 101,897 $ 35,997 Entity Wide Reporting Ciena's operating segments each engage in business across four geographic regions: North America; Europe, Middle East and Africa (“EMEA”); Asia Pacific (“APAC”); and Caribbean and Latin America (“CALA”). North America includes only activities in the United States and Canada. The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena's delivery of products and performance of services. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 North America $ 465,238 $ 438,013 $ 1,295,539 $ 1,226,222 EMEA 96,068 104,266 293,387 281,163 CALA 51,709 46,606 120,826 148,312 APAC 115,704 81,665 347,486 228,685 Total $ 728,719 $ 670,550 $ 2,057,238 $ 1,884,382 North America includes $438.1 million and $410.0 million of United States revenue for fiscal quarters ended July 31, 2017 and 2016 , respectively. For the nine months ended July 31, 2017 and 2016 , United States revenue was $1.2 billion and $1.1 billion , respectively. No other country accounted for 10% or more of total revenue for the periods presented above. The following table reflects Ciena's geographic distribution of equipment, building, furniture and fixtures, net, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, specifically identified. Equipment, building, furniture and fixtures, net, attributable to geographic regions outside of the United States and Canada are reflected as “Other International.” For the periods below, Ciena's geographic distribution of equipment, building, furniture and fixtures was as follows (in thousands): July 31, October 31, Canada $ 208,422 $ 173,885 United States 94,790 103,018 Other International 11,638 11,503 Total $ 314,850 $ 288,406 For the periods below, customers accounting for at least 10% of Ciena’s revenue, were as follows (in thousands): Quarter Ended July 31, Nine Months Ended July 31, 2017 2016 2017 2016 AT&T $ 120,931 $ 105,418 $ 324,900 $ 348,032 Verizon 82,918 n/a 206,272 n/a Total $ 203,849 $ 105,418 $ 531,172 $ 348,032 n/a Denotes revenue representing less than 10% of total revenue for the period The customers identified above purchased products and services from each of Ciena's operating segments. |