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EXHIBIT 99.2
PRESS RELEASE DATED SEPTEMBER 14, 1998
INVESTOR CONTACT: Suzanne DuLong
(888) 243-6223
email: ir@CIENA.com
PRESS CONTACT: Denny Bilter
(410) 865-8677
email: dbilter@ciena.com
FOR IMMEDIATE RELEASE
CIENA Reports Final Fiscal Third Quarter Results; Issues Cautious Short-Term
Outlook
LINTHICUM, MD - SEPTEMBER 14, 1998 - CIENA Corporation (NASDAQ: CIEN) today
reported final results for its third fiscal quarter ended August 1, 1998,
in-line with its previously announced expectations.
Revenue for the quarter totaled $129.1 million. This compares with $121.8
million in revenue reported for the third fiscal quarter of 1997. Net income
for the quarter was $16.1 million, or $0.15 per share, exclusive of one-time
charges associated with CIENA's previously announced settlement with Pirelli
and costs related to the proposed merger with Tellabs. This compares with net
income for the third fiscal quarter of 1997 of $35.7 million, or $0.34 cents
per share.(1)
For the nine months ended August 1, 1998, revenue increased to $416.9 million
from $283.1 million for the first nine months of 1997. Net income for the
period was $86.8 million, or $0.81 per share, compared to $81.1 million, or
$0.78 per share, for the same period in 1997, once again, excluding the effect
of one-time charges for purchased research and development and merger costs in
1998 and additional expense accruals pertaining to the Company's litigation
with Pirelli in both 1997 and 1998.(1)
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
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expenses. All earnings per share amounts represent diluted earnings per share
as defined within Statement of Financial Accounting Standards No. 128 (SFAS
128).
"As we discussed previously, CIENA's gross margins during the third fiscal
quarter were impacted by the combination of price concessions to a strategic
customer in return for higher volume commitments, and lower than expected
overall volume during the quarter," said CIENA's Senior Vice President, Finance
and Chief Financial Officer, Joseph Chinnici. "In light of continued evidence
that our
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competitors are heavily discounting their prices in an attempt to gain a market
presence, we're adjusting our long-term gross margin target model range to 45
to 50 percent."
"During the last year CIENA grew its manufacturing infrastructure to
accommodate a higher level of business than we will realize in the near-term;
as a result it is likely that unabsorbed manufacturing overhead will pull gross
margins below the target model short-term," continued Chinnici. "Provided
volumes increase as we progress through fiscal 1999 as we currently expect,
unabsorbed manufacturing overhead will diminish in significance. We also expect
to continue our focus on lowering material costs and reducing the costs in our
products through ongoing engineering efforts in order to partially mitigate the
potential negative impact of pricing pressure on gross margins."
CIENA continued to make positive progress toward its goal of diversifying both
its product and customer base during the quarter, announcing and shipping to a
total of 11 customers including two new customers: Telecom Developpment and
Racal; both of which are expected to contribute to revenue during fiscal year
1999.
Commenting on his expectations for CIENA's fiscal fourth quarter and fiscal
year 1999, Patrick Nettles, CIENA's President and Chief Executive Officer,
said: "Feedback received from our sales force indicates that the uncertainty
created by the events of the last few weeks and attempts of our competitors to
capitalize on that uncertainty may delay or alter some customers' near-term
purchase decisions. As a result, and due to the loss of expected incremental
business at DTI, we believe fiscal fourth quarter revenues and operating
results will be materially below those reported for the third fiscal quarter.
In addition, while visibility is, as always, very limited beyond the next
quarter, we are now resetting our fiscal 1999 business model at a level that
anticipates modest growth in year-over-year revenue and net income."
"Going forward, we intend to restore shareholder value as quickly as possible
by: 1) continuing our proven record of rapid product introduction and
technology innovation that enables our customers to simplify their networks and
lower the cost of bandwidth; 2) driving down costs in our products to help us
achieve and maintain solid margins, and; 3) bolstering our sales and marketing
efforts," said Nettles.
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In a separate press release made today, CIENA announced it has restructured its
sales and marketing organization to better address the rapidly evolving DWDM
market opportunity and the company's growing customer base.
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"There is no doubt that the next several quarters will be challenging for CIENA
as we work to rebuild shareholder value," said Jon Bayless, CIENA's Chairman of
the Board. "The company has recently experienced first-hand a number of the
risks we've regularly discussed as being inherent in growing a dynamic business
in an industry dominated by large competitors. CIENA's Board of Directors has
complete confidence that CIENA's management team will restore positive momentum
and lead this company through the challenges it faces during its next important
phase of development."
In conclusion Nettles said: "As an emerging company, CIENA has battled the
underdog status for most of its corporate life. As a team, our employees have
faced and conquered enormous hurdles and their spirit is unyielding.
Ultimately, it is these highly motivated people, our field-proven products, and
our industry-leading technology that will enable us to capitalize on the
opportunities ahead."
(1) Past financial results have been restated to reflect the consolidated
results of Alta Telecom, Inc., acquired by CIENA on February 19, 1998.
NOTE TO INVESTORS:
Forward-looking statements in this release, including
statements regarding (1) the anticipation that fiscal fourth quarter revenues
and operating results will be materially below those reported for the third
fiscal quarter and that net income also will likely be significantly lower and,
(2) the setting of the fiscal 1999 business model to a level that shows modest
year-over-year revenue and net income growth, 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 Quarterly Report on
Form 10-Q, as filed with the Securities and Exchange Commission on September
14, 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 in Norcross, 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.
(CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE
SHEETS FOLLOW)
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CIENA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
QUARTER ENDED NINE MONTHS ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1997 1998 1997 1998
--------- --------- --------- ---------
Revenue $ 121,845 $ 129,116 $ 283,121 $ 416,926
Cost of goods sold 47,569 70,431 116,222 193,326
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Gross profit 74,276 58,685 166,899 223,600
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Operating expenses:
Research and development 7,245 18,805 14,994 45,656
Selling and marketing 6,722 12,526 14,738 33,538
General and administrative 3,241 3,908 8,041 12,148
Purchased research and development - - - 9,503
Pirelli litigation - 20,579 5,000 30,579
Merger costs - 2,017 - 2,017
--------- --------- --------- ---------
Total operating expenses 17,208 57,835 42,773 133,441
--------- --------- --------- ---------
Income from operations 57,068 850 124,126 90,159
Interest and other income, net 1,511 2,577 3,893 9,783
Interest expense (85) (58) (319) (223)
--------- --------- --------- ---------
Income before income taxes 58,494 3,369 127,700 99,719
Provision for income taxes 22,770 1,280 49,641 42,627
--------- --------- --------- ---------
Net income $ 35,724 $ 2,089 $ 78,059 $ 57,092
========= ========= ========= =========
Basic net income per common share $ 0.36 $ 0.02 $ 1.15 $ 0.56
========= ========= ========= =========
Diluted net income per common share and dilutive
potential common share $ 0.34 $ 0.02 $ 0.75 $ 0.53
========= ========= ========= =========
Weighted average basic common shares outstanding 98,021 102,089 68,010 101,360
========= ========= ========= =========
Weighted average basic common and dilutive potential
common shares outstanding 106,296 108,215 103,705 107,775
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CIENA CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
OCTOBER 31, JULY 31,
1997 1998
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ASSETS
Current assets:
Cash and cash equivalents $ 268,588 $ 193,486
Marketable debt securities - 28,132
Accounts receivable, net 72,336 108,480
Inventories, net 41,109 76,343
Deferred income taxes 9,139 7,628
Prepaid income taxes - 20,499
Prepaid expenses and other 3,093 10,345
--------- ---------
Total current assets 394,265 444,913
Equipment, furniture and fixtures, net 67,618 125,260
Goodwill and other intangible assets, net - 17,102
Other assets 1,396 3,960
--------- ---------
Total assets $ 463,279 $ 591,235
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,760 $ 42,767
Accrued liabilities 32,022 32,571
Income taxes payable 261 943
Deferred revenue 2,591 192
Other current obligations 1,179 893
--------- ---------
Total current liabilities 60,813 77,366
Deferred income taxes 28,167 31,346
Other long-term obligations 1,885 1,592
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Total liabilities 90,865 110,304
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 102,541,814 shares issued and outstanding 1,003 1,025
Additional paid-in capital 245,219 296,951
Notes receivable from stockholders (64) (333)
Translation adjustment (5) (65)
Retained earnings 126,261 183,353
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Total stockholders' equity 372,414 480,931
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Total liabilities and stockholders' equity $ 463,279 $ 591,235
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