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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year endedOctober 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
  
For the transition period from                    to                    
Commission file number 001-36250
Ciena Corporation
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
7035 Ridge Road, Hanover, MD
(Address of principal executive offices)

23-2725311
(I.R.S. Employer
Identification No.)
21076
(Zip Code)
Registrant’s telephone number, including area code: (410) 694-5700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueCIENNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer


Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes No þ
The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $7.8 billion based on the closing price of the Common Stock on the New York Stock Exchange on April 30, 2021.
The number of shares of registrant’s Common Stock outstanding as of December 10, 2021 was 154,882,650.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of the Form 10-K incorporates by reference certain portions of the registrant’s definitive proxy statement for its 2022 Annual Meeting of Stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this report.


CIENA CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED OCTOBER 30, 2021
TABLE OF CONTENTS
 Page
 
  
 
 
  
 
  
  
 
  



2

PART I
Cautionary Note Regarding Forward-Looking Statements

This annual report contains statements that discuss future events or expectations, projections of results of operations or financial condition, changes in the markets for our products and services, trends in our business, business prospects and strategies and other “forward-looking” information. In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “can,” “should,” “could,” “expects,” “future,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “projects,” “targets,” or “continue” or the negative of those words and other comparable words. These statements may relate to, among other things, the impact of COVID-19 on our business, financial results and operations; our competitive landscape; market conditions and growth opportunities; factors impacting our industry and markets, including global supply chain constraints; factors impacting the businesses of network operators and their network architectures; adoption of next-generation infrastructures that are more open, programmable and automated; our strategy, including our research and development, supply chain and go-to-market initiatives; efforts to increase application of our solutions in customer networks and to increase the reach of our business into new or growing customer and geographic markets; our backlog and seasonality in our business; expectations for our financial results, revenue, gross margin, operating expense and key operating measures in future periods; the adequacy of our sources of liquidity to satisfy our working capital needs, capital expenditures and other liquidity requirements; business initiatives including information technology (“IT”) transitions or initiatives; the impact of the Tax Cuts and Jobs Act (the “Tax Act”) and changes in our effective tax rates; and market risks associated with financial instruments and foreign currency exchange rates. These statements are subject to known and unknown risks, uncertainties and other factors, and actual events or results may differ materially from any future results, activity, performance, or achievements expressed or implied by these forward-looking statements, including due to factors such as those set forth below in “Risk Factors Summary.”
    
For a discussion of additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this annual report. We operate in a very competitive and dynamic environment and new risks and uncertainties emerge, are identified or become apparent from time to time and therefore may not be identified in this annual report. We cannot predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this annual report. You should be aware that the forward-looking statements contained in this annual report are based on our current views and assumptions. We undertake no obligation to revise or update any forward-looking statements made in this annual report to reflect events or circumstances after the date hereof or to reflect new information or the occurrence of unanticipated events, except as required by law. The forward-looking statements in this annual report are intended to be subject to protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Unless the context requires otherwise, references in this annual report to “Ciena,” the “Company,” “we,” “us” and “our” refer to Ciena Corporation.

Risk Factors Summary

Investing in our securities involves a high degree of risk. The following is a summary of the principal factors that make an investment in our securities speculative or risky, all of which are more fully described below in the section titled “Risk Factors.” This summary should be read in conjunction with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business. In addition to the following summary, you should consider the information set forth in the “Risk Factors” section and the other information contained in this annual report before investing in our securities.

Risks Related to Our Business and Industry
Our revenue, gross margin and operating results can fluctuate significantly and unpredictably from quarter to quarter.
Challenges relating to current supply chain constraints, including semiconductor components, could adversely impact our growth, gross margins and financial results.
A small number of customers account for a significant portion of our revenue. The loss of these customers or a significant reduction in their spending could have a material adverse effect on our business and results of operations.
We face intense competition that could hurt our sales and results of operations, and we expect the competitive landscape in which we operate to continue to broaden to include additional solutions providers.
The COVID-19 pandemic has impacted our business and results of operation and could have a material adverse effect on our business, results of operations and financial condition in the future.
Investment of research and development resources in communications networking technologies for which there is not an adequate market demand, or failure to invest sufficiently or timely in technologies for which there is market demand, would adversely affect our revenue and profitability.
We have no guaranteed purchases and regularly have to re-win business for existing customers.
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Network equipment sales often involve lengthy sales cycles and protracted contract negotiations that may require us to agree to commercial terms or conditions that negatively affect pricing, risk allocation, payment and the timing of revenue recognition.
If we are unable to adapt our business to the consumption models for networking solutions adopted by our customers and to offer attractive solutions across these consumption models, our business, competitive position and results of operations could be adversely affected.
Our go-to-market activities and the distribution of our WaveLogic® coherent modem technology within the market for high-performance transceivers/modems could expose us to increased or new forms of competition, or adversely affect our existing systems business and results of operations.
If we fail to predict demand accurately, we may be required to write off significant amounts of inventory as a result of our inventory purchase practices and could incur additional costs or experience manufacturing delays.
If the market for network software does not evolve in the way we anticipate or if customers do not adopt our Blue Planet Automation Software and Services, we may not be able to monetize these software assets and realize a key part of our business strategy.
Our exposure to the credit risks of our customers and resellers may make it difficult to collect receivables and could adversely affect our revenue and operating results.
We may be required to write down the value of certain significant assets, which would adversely affect our operating results.
Product performance problems and undetected errors affecting the performance, interoperability, reliability or security of our products could damage our business reputation and negatively affect our results of operations.
Strategic acquisitions and investments could disrupt our operations and may expose us to increased costs and unexpected liabilities.

Risks Relating to the Macroeconomic Environment and our Global Presence
Our business and operating results could be adversely affected by unfavorable changes in macroeconomic and market conditions and reductions in the level of spending by customers in response to these conditions.
The international scale of our sales and operations exposes us to additional risk and expense that could adversely affect our results of operations.
Efforts to increase our sales and capture market share in targeted international markets may be unsuccessful.
We may be adversely affected by fluctuations in currency exchange rates.

Risks Related to Our Operations and Reliance on Third Parties
We may experience delays in the development and production of our products that may negatively affect our competitive position and business.
We rely on third-party contract manufacturers, and our business and results of operations may be adversely affected by risks associated with their businesses, financial condition and the geographies in which they operate.
Our reliance on third-party component suppliers, including sole and limited source suppliers, exposes our business to additional risk, including risk relating to our suppliers’ businesses and financial position and risks arising as a result of geopolitical events, and could limit our sales, increase our costs and harm our customer relationships.
We rely on third-party resellers and distribution partners to sell our solutions, and on third-party service partners for installation, maintenance and support functions, and our failure to develop and manage these relationships effectively could adversely affect our business, results of operations, and relationships with our customers.
We may be exposed to unanticipated risks and additional obligations in connection with our resale of complementary products or technology of other companies.
Growth of our business is dependent on the proper functioning and scalability of our internal business processes and information systems. Adoption of new systems, modifications or interruptions of services may disrupt our business, processes and internal controls.
Restructuring activities could disrupt our business and affect our results of operations.
If we are unable to attract and retain qualified personnel, or if our existing personnel are harmed by COVID-19, we may be unable to manage our business effectively.

Risks Related to Intellectual Property, Litigation, Regulation and Government Policy
Our intellectual property rights may be difficult and costly to enforce.
We may incur significant costs in response to claims by others that we infringe their intellectual property rights.
Our products incorporate software and other technology under license from third parties, and our business would be adversely affected if this technology were no longer available to us on commercially reasonable terms.
Data security breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.
We are a party to legal proceedings, investigations and other claims or disputes, which are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures, or prevent us from taking certain actions, any of which could adversely affect our business.
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Changes in trade policy, including the imposition of tariffs and efforts to withdraw from or materially modify international trade agreements, may adversely affect our business, operations and financial condition.
Changes in government regulations affecting the communications and technology industries and the businesses of our customers could harm our prospects and operating results.
The effects of the United Kingdom’s withdrawal from membership in the European Union remain uncertain.
Government regulations related to the environment, climate change and social initiatives could adversely affect our business and operating results.
Changes in tax law or regulation, effective tax rates and other adverse outcomes with taxing authorities could adversely affect our results of operations.
Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price.

Risks Related to Our Common Stock, Indebtedness and Investments
Our stock price is volatile.
Outstanding indebtedness under our senior secured credit facilities may adversely affect our liquidity and results of operations and could limit our business.
Significant volatility and uncertainty in the capital markets may limit our access to funding on favorable terms or at all.

Item 1. Business
Overview
We are a networking systems, services and software company, providing solutions that enable a wide range of network operators to deploy and manage next-generation networks that deliver services to businesses and consumers. We provide hardware, software and services that enable the transport, routing, switching, aggregation, service delivery and management of video, data and voice traffic on communications networks. Our solutions are used by communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education institutions and emerging network operators.

Our portfolio is designed to enable what we refer to as the Adaptive Network™, our vision for a network end state that emphasizes a programmable and scalable network infrastructure, software control and automation capabilities, network analytics and intelligence, and related advanced services. By transforming network infrastructures into a dynamic, programmable environment driven by automation and analytics, network operators can realize greater business agility, dynamically adapt to changing end-user service demands and rapidly introduce new revenue-generating services. They can also gain valuable real-time network insights, allowing them to optimize network operation and maximize the return on their network infrastructure investment.

Our solutions include Networking Platforms, including our Converged Packet Optical and Routing and Switching portfolios, which can be applied from the network core to end-user access points, and which allow network operators to scale capacity, increase transmission speeds, allocate traffic efficiently and adapt dynamically to changing end-user service demands. Our Converged Packet Optical portfolio includes products that support the connection of content to content, including in long haul and regional, submarine and data center interconnect networks, and users to content, including in metro and edge networks. Our Routing and Switching portfolio includes products and solutions that enable efficient internet protocol (“IP”) transport in next-generation metro edge, access and aggregation networks, connecting users to content in applications that include 5G and Internet of Things (“IoT”), mobile backhaul, optical access, virtualization and enterprise services.

To complement our Networking Platforms, we offer Platform Software, which includes a wide array of software solutions that deliver operations, administration, maintenance, and provisioning (“OAM&P”) functionality, as well as domain control, orchestration, operational support systems (“OSS”) and service assurance to achieve closed loop automation across multi-vendor and multi-domain network environments. Through our Blue Planet® Software suite, we enable customers to accelerate the digital transformation of their networks through service lifecycle automation.

In addition to our systems and software, we also offer a broad range of services that help our customers build, operate and improve their networks and associated operational environments. These include network transformation, consulting, implementation, systems integration, maintenance, network operations center (“NOC”) management, and optimization services.

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Access to SEC Reports
Our website address is www.ciena.com. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, available free of charge in the “Investors” section of our website as soon as reasonably practicable after we file these reports with the Securities and Exchange Commission (the “SEC”). We routinely post these reports, recent news and announcements, financial results and other important information about our business on our website at www.ciena.com. Information contained on our website is not a part of this annual report.
Industry Background
Network Traffic Growth and Increased Capacity Requirements
The markets in which we sell are dynamic and are characterized by a high rate of change. Optical networks – which carry video, data and voice traffic by encoding digital information on multiple wavelengths of light traveling across fiber optic cables – have experienced strong traffic growth. This network traffic growth is being driven by a diverse set of communications services that often require on-demand service levels by enterprise and consumer end users, as well as cloud-based services and applications:
Cloud-Based Services. Enterprises and consumers continue to replace locally-housed computing and storage by adopting a broad array of innovative cloud-based models – including Platform as a Service (PaaS), Software as a Service (SaaS) and Infrastructure as a Service (IaaS) – and an expanding range of cloud-based services that host key applications, store data, enable the viewing and downloading of content, and utilize on-demand computing resources. In addition, content is increasingly moving to the edge of the network, creating new capacity and traffic demands closer to the user.
Over-the-Top (“OTT”) Services and Video Streaming. OTT content refers to video, multimedia and other applications provided directly from the content source to the viewer or end user across a third-party network. Traffic from streaming and OTT services, including high definition and ultra-high definition video, has expanded with the increased availability of, and end-user demand for, video content accessible through a variety of devices and media.
Mobile Traffic and Applications. Traffic from mobile web applications, including video, internet and data services, has expanded with the continued proliferation of smartphones and other wireless devices. Because much of wireless traffic ultimately travels across a wireline network to reach its destination, growth in mobile communications continues to place demands upon wireline networks, including the backhaul and fronthaul portions of networks emanating from cell sites.
Residential Access Applications and Enterprise Applications. In recent years we have seen a shift in bandwidth demands, traffic patterns and computing functions to the edge of networks. This trend has been meaningfully accelerated by the COVID-19 pandemic, including due to an increase in remote and hybrid working and work from home arrangements. With a higher percentage of data flows concentrating closer to the edge of the network, more capacity and higher bandwidth to home and enterprise locations is required. These shifts could be permanent, and could influence network architectures and require network operators to adapt.
Emerging technologies, services and applications are further impacting or expected to impact network infrastructures, particularly at the edge of networks, where increased computing power and automation are required to meet the quality of experience required by end users. These include:
5G. Fifth-generation wireless broadband (“5G”) technology is enabling meaningful increases in bandwidth and performance, and enabling emerging applications and services that 4G/LTE networks cannot support. To fully capitalize on these opportunities, network operators will need to consider the demands 5G technology will place on their wireline infrastructures, including through the addition of additional cell sites as part of the network densification efforts that are paving the way for 5G implementation.
Fiber Deep and Fiber-Based Access Networks. Similar to 5G, Fiber Deep is a network densification initiative by cable and multiservice operators that seeks to push more digital fiber closer to the end user and to increase potential bandwidth, computing capability and data speeds to homes and enterprises, while at the same time decreasing power, space and operating costs. Wireline service providers are responding to similar trends by pushing fiber to the home and deeper into access networks.
Internet of Things. As networked connections between devices and servers grow, machine-to-machine-related traffic (“M2M”) is expected to represent an increasing portion of traffic. These connections allow sharing of data that can be
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monitored and analyzed, including in smart grid applications, health care and safety monitoring, resource and inventory management, home entertainment, consumer appliances, connected transportation and other M2M data applications.
Ultra-High Definition Video (“UHD”) and Virtual Reality (“VR”) and Augmented Reality (“AR”). UHD video and the advent of immersive technologies like VR, AR and 360° video are likely to place further capacity and capability demands on networks as adoption of these technologies grows. Consumer electronics industries are rapidly advancing these technologies and making them more widely available and affordable to consumers.
Edge Computing. Immersive cloud services and gaming using AR and VR technologies require a low latency environment to provide the required user experience. We expect network operators to increase the number and capabilities of edge computing locations to allow these latency-sensitive workloads to be processed closer to users, which may affect network topologies and traffic patterns.
Machine Learning (“ML”) and Artificial Intelligence (“AI”). As broad foundational technologies that increase network intelligence and improve automation, ML and AI enable improvements in network planning, operations, user experience and trouble resolution. We believe that adoption of these technologies will continue to increase as the IoT expands and additional services are created, and therefore that ML and AI will serve as drivers of further network traffic and solutions innovation.
We believe that increased adoption of these technologies, services, and applications and their performance requirements will further increase network traffic and place additional service challenges on network infrastructures, requiring network operator investment in their metro, access and aggregation networks, as well as their core networks.
Demand for More Programmable and Automated Networks
Network operators continue to invest in the modernization of their businesses, with an objective to create a more digital experience, reduce operational costs and introduce more agility. To achieve this goal, they are adopting next generation infrastructures that combine end-to-end service automation with the deployment of highly programmable infrastructure. We expect network operators will continue to pursue strategies that emphasize one or more of the following:
Closed Loop Automation. Network operators are seeking to reduce network operating costs and better leverage analytics, automation and control capabilities to automate end-to-end service creation and delivery. Closed loop automation is a continuous cycle of communications between the programmable network infrastructure and software control elements to analyze network conditions, traffic demands, and resource availability and to determine the best placement of traffic for optimal service quality and resource utilization.
Software-Defined Networking (“SDN”). SDN seeks to simplify networks to create more open environments that ease management, support automation and quickly deliver customized services to end users, by enabling individual network elements to be directly programmable by standards-based software control. This results in end-to-end visibility of network flows, enabling the optimization of traffic paths and the control of data flows through a network.
Network Function Virtualization (“NFV”). NFV is the separation of network services or capabilities from the physical network assets that traditionally provide these services or capabilities to end users. Network operators are increasingly using solutions like NFV, which enables network functions that traditionally would have run on specialized or dedicated hardware to be provided through software that runs on industry-standard servers and network and storage platforms, in order to reduce their dependence on single-purpose hardware and accelerate the time to market for new revenue-generating services.
We believe that adoption of these strategies, and the related evolution of core, metro and access network infrastructures, will require network operators and their network solutions vendors to increasingly look to utilize an ecosystem of both physical and virtual network resources, optimized through software. We expect that these network architectural approaches, in turn, will drive increased openness and interoperability of multi-vendor, multi-domain network environments, requiring an increased degree of cooperation, collaboration and interoperability among networking solutions vendors.
Different Approaches to Design and Procure Network Infrastructure Solutions
Network operators are pursuing a diverse range of approaches, or “consumption models,” in their design and procurement of network infrastructure solutions. In addition to purchasing fully integrated network solutions including hardware, software and services from the same vendor, new consumption models include the procurement or use of:
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a fully integrated infrastructure solution from one vendor with the separate use of a network operator’s own software or that of another vendor;
integrated photonic line systems with open interfaces from one vendor and the separate or “disaggregated” procurement of modem technology from a different vendor;
open source software in concert with or as an alternative to integrated, proprietary third-party software solutions;
open IP network operating systems running on off-the-shelf third-party equipment; and
system integration services or customer self-integration to reconstitute the disaggregated components.
Some network operators, including certain of our largest customers, are also pursuing the development and use of published reference designs and open source specifications for the procurement of off-the-shelf or commoditized hardware (often referred to as “white box” hardware). This commoditized hardware could be used with in-house developed data path and control software or third-party developed network operating software. Further, a number of network operators are pursuing network strategies that emphasize the deployment of smaller form factor, pluggable modem technology, typically in a switch or router platform, as an alternative to integrated optical platforms that combine purpose-built routers and optical systems.
The consumption models that ultimately emerge and their level of adoption will depend in significant part on the circumstances and strategies of certain network operators. While the adoption of these approaches has been limited to date, we expect that continued customer consideration of a variety of consumption models will require network operators and vendors alike to assess, and possibly broaden, their offerings and commercial models over time, thereby placing a premium on a vendor’s ability to provide robust network solutions with the maximum amount of flexibility and choice.
Supply Chain Constraints
Due to increased demand across a range of industries, the global supply market for certain raw materials and components, including in particular the semiconductor components used in most of our products, has experienced significant strain in recent periods. These conditions, which became more acute during the second half of fiscal 2021, have been exacerbated in part by the COVID-19 pandemic, supply chain challenges, and the strong demand environment. These conditions are impacting a wide range of industries, and across the networking industry, participants are experiencing component shortages, longer lead times and increased cost of components. We believe these supply chain challenges and their adverse impact on our industry will persist at least through the first half of calendar 2022, and may extend into periods thereafter.

Industry Consolidation

Our industry has experienced significant consolidation in recent years among our competitors, customers and suppliers alike. To drive scale and market share gains, and to meet the intense investment capacity required to keep pace with technology innovation, there has been increased acquisition activity among competing vendors of networking solutions. Acquisition activity has also focused on adding complementary technologies, or accessing adjacent network domains or markets that increase addressable markets of networking vendors. Among our customers, there have been significant horizontal and vertical consolidation activities by communications service providers and cable operators, with several such operators acquiring media and content companies. Customer consolidation can increase their purchasing power and has in the past resulted in delays or reductions in network spending due to changes in strategy or leadership, the timing of regulatory approvals and debt burdens associated with such transactions. Further, significant consolidation among component suppliers may reduce the number of independent suppliers and could create supply challenges affecting our pricing or supply volumes. Consolidation activity across our industry can create opportunities and challenges for our business. We expect this trend to continue, and it may have a significant impact on the entire industry, including our competitive landscape.
Product Development & Sustainability
In the face of growing network traffic and service expansion, network operators are looking toward network technology innovation as a means to support their business model, to prepare for a low carbon future and to meet the requirements of their stakeholders. Network operators are increasingly looking to their technology vendor partners, who form part of their value and supply chain, as a key element of their overall sustainability strategy to manage the lifecycle impact of their networks, including their related power consumption, greenhouse gas emissions and other resource and environmental impacts. For innovation leaders capable of advancing a development strategy and product roadmap that addresses the network performance and sustainability outcomes sought by network operators, a market transition to a low carbon future and the ability to offer greener technology offerings present meaningful opportunities for enhanced competitive position and business growth for vendors.
Strategy
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Our strategy is to leverage our technology leadership, diversification and global scale to drive the profitable growth of our business. Key elements of this strategy include:
Extend Innovation Leadership in Core and Optical Networking. We are focused on using our significant research and development investment capacity to push the pace of innovation in our markets and provide leading offerings that leverage our Adaptive Network vision to make our customers’ networks more dynamic through further advances in programmable network platforms, analytics, control and automation. To strengthen our optical leadership, in fiscal 2021 we brought to market our footprint-optimized, lower power consumption WaveLogic 5 Nano (“WL5n”) 100G-400G coherent pluggable transceivers to address next-generation access, metro, regional and data center interconnect network applications. We also introduced innovative intelligent photonics platforms in our 6500 RLS and ELS and are advancing our Converged Packet Optical portfolio for applications in data center interconnection, submarine networks and edge networks. To support our enhanced portfolio and solutions offerings, we intend to grow our attached services business and leverage network transformation with a broader service offering that includes network migration, optimization and multi-vendor network integration.

Invest in Next Generation Metro and Edge Networking Solutions. To expand our addressable markets and capture additional opportunities in metro and edge applications we are making significant investments in our Routing and Switching solutions. We are leveraging our optical expertise to offer new architectural approaches to address Metro and Edge network use cases. Among other things, we are developing Routing and Switching solutions with enhanced IP/Ethernet capabilities, including packet routing, aggregation and switching, 5G cross-haul, Fiber Deep, fiber-based passive optical network (“PON”) access, and edge computing. To advance our strategy, and pursue the opportunity for our Routing and Switching solutions to transform the network edge, including 5G networks and cloud environments, in the first quarter of fiscal 2022, we acquired from AT&T its Vyatta virtual routing and switching technology.

Embrace Multiple Consumption Models and Promote Choice. As network operators pursue diverging consumption models, we intend to offer a range of networking solutions across those models to drive the evolution of next-generation network infrastructures and to promote choice in our markets. We are making our technology available in both integrated systems and pluggable form factors that together address a range of technical and economic requirements of network operators pursuing differing consumption models. Specifically, we are pursuing these two distinct product development paths for our next-generation coherent optical chipset to enable this range of solutions, and, in fiscal 2021 we introduced our WL5n 100G-400G coherent pluggable transceivers for next-generation access, metro, regional and data center interconnect network applications. Separately, through our Optical Microsystems business we are pursuing sales opportunities that leverage our WaveLogic technology in the form of high-performance transceivers/modems – the combination of a Ciena-designed optical chipset and application-specific integrated circuit (ASIC) with other key optical components and sold independently of integrated systems. Consistent with industry practice, we sell our transceiver/modem technology in the form of an optical module or pluggable to a variety of market participants, including other original equipment manufacturers with whom we compete. By addressing multiple consumption models, we seek to secure a larger portion of the world’s optical network wavelengths, expand our addressable market and access new customer verticals and applications. We expect this may require us to continue to broaden our existing product offering beyond traditional hardware systems and to expand our commercial models over time.

Promote Enhanced Software Automation. We seek to improve network layer automation and programmability by advancing our microservices-based domain controller Manage, Control and Plan (“MCP”) software. We are also focused on gaining adoption and expanding application for our Adaptive IP software, leveraging our Service-Aware Operating System (“SAOS”) embedded in our Routing and Switching products. We also seek to promote broader adoption of our Blue Planet Automation Software, highlighting its ability to transform network operations and management and reduce the need for manual intervention in key operational processes. In so doing, we believe that Blue Planet can help customers with their digital transformations by transitioning legacy networks into “service ready” networks, accelerating the creation, delivery and lifecycle management of new services. To expand our addressable market, we are pursuing opportunities for our Blue Planet Automation Software platform in enterprise-related applications. We are also investing in Blue Planet-related services and seek to use insights from common business, operational and networking challenges to position our Blue Planet solutions as the means by which to achieve the digital network transformation sought by our customers. A key part of our strategy is to grow our software business as a portion of our total business through expanded customer adoption and broader applications, and to gain adoption of recurring and subscription-based models.

Focus Diversification on High-Growth Applications and Customer Segments. We believe that the continued diversification of our business is important to address the dynamic industry environment in which we operate, to continue to grow our business, and to better withstand potential slowdowns adversely affecting particular geographies, markets or customer segments. A key part of our strategy is to continue to diversify our solutions offerings, customer base and geographic reach to address fast-growing applications and markets, including those that are adjacent to or complementary with our current addressable market. Our go-to-market strategy seeks to capture additional market share with existing customers and emerging network operators, and to displace competitors, particularly in international markets.
Customers and Markets
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We sell our product and service solutions through direct and indirect sales channels to network operators in the following customer and market segments:
Communications Service Providers. Our communications service provider customers include regional, metro, national and international wireline and wireless carriers, and access network providers.
Web-scale Providers. Our “Web-scale” provider customers – also often referred to in the market as hyper-scale providers – include internet content providers and providers of internet services and infrastructure, including data centers, cloud networking, storage infrastructure and web hosting services. These providers are focused on applications such as search, social media, video, real-time communications and cloud-based service offerings, as well as other emerging network services. As significant purchasers of capacity on submarine networks and from communications service providers on a global basis, these customers can also influence networking solution alternatives by those network operators.
Cable and Multiservice Operators (MSO). Our customers include regional, metro, national and international cable and multiservice operators.
Submarine Network Operators. Our customers include service providers, Web-scale providers and consortia operators of submarine communications networks across the globe.
Enterprises. Our enterprise customers include large, multi-site commercial organizations, including participants in the financial, healthcare, transportation, utilities, energy and retail industries.
Government, Research and Education. Our government customers include federal and state agencies in the United States as well as international governmental entities. Our research and education customers include research and education institutions around the world, as well as communities or consortia, including leaders in research, academia, industry and government.
Products and Services
Our products and services include the solutions described below within our Networking Platforms, Platform Software and Services, Blue Planet Automation Software and Services, and Global Services operating segments. We also offer solutions that bring together multiple products and services from across our operating segments and portfolios to address key customer use cases and infrastructure needs with an aim to enable our customers to evolve their existing network environments.
Networking Platforms
Our Networking Platforms segment consists of our Converged Packet Optical and Routing and Switching portfolios.
Converged Packet Optical. Our Converged Packet Optical portfolio includes a range of products and solutions that use our WaveLogic coherent optical technology and our intelligent photonics solutions and are optimized for the convergence of coherent optical transport, open optical networking, Optical Transport Network (“OTN”) switching and IP routing and switching.
Our 6500 Packet-Optical Platform provides a flexible and scalable dense wavelength division multiplexing (“DWDM”) solution that adds capacity to core, regional, metro and submarine networks and enables efficient transport at high transmission speeds. This platform provides leading coherent wavelength capacities, from 100G to 800G, along with a flexible photonic layer and multi-layer control plane capabilities for scale and service differentiation. This platform, which includes several chassis sizes and a comprehensive set of line cards optimized for individual services or applications, can be used throughout the network, from customer premises to access and metropolitan networks, regional and core networks, and submarine cable and satellite communications landing sites.
Our Waveserver® family of products consists of compact interconnect platforms that allow network operators to scale bandwidth and support high-bandwidth interconnect applications, such as high-speed data transfer, content delivery, virtual machine migration and disaster recovery/backup between data centers. Waveserver is purpose-built to address disaggregated transponder, data center and general space-constrained applications using a small footprint and low power design. With its modern software architecture, open APIs, and common data models, Waveserver is easy to operate and integrate into existing networks and facilitates deployment of on-demand cloud and high-capacity connectivity services.
Our 6500 Reconfigurable Line System (RLS) is a compact, simple-to-deploy, disaggregated intelligent photonic layer line system that improves scalability, reduces footprint, and offers more flexibility and programmability. Its applications include long-haul and metro data center interconnection and general network modernization and simplification. It offers double fiber
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capacity through automated C- and L-band deployments and provides highly dense remote optical add/drop multiplexing and switching features that enable network operators to react to unpredictable traffic requirements by scaling connectivity and capacity.
Our 5400 family of Packet-Optical Platforms consist of multi-terabit reconfigurable switching systems that consolidate the functionality of an add/drop multiplexer and a digital cross-connect into a single, high-capacity intelligent switching system. These products address both core and metro segments of communications networks and support key managed services, including Ethernet/TDM Private Line and IP services. These products provide for optical transport, traffic aggregation at the network edge and switching that are optimized for handoff at the network core.
Our coherent-optimized edge line system, Coherent ELS, is a high-capacity disaggregated line system that is designed to address next-generation access photonic line system requirements, including the transport of coherent wavelengths originating from pluggables, through a compact, hardened form factor designed to accommodate outside plant deployments. With a focus on reducing operational complexity, our Coherent ELS open line system (OLS) uses integrated intelligence and automation to simplify and scale deployments.
As discussed above, in fiscal 2021 we brought to market our footprint-optimized WL5n 100G-400G coherent pluggable transceivers to address next-generation access, metro, regional and data center interconnect network applications. However, our entrance into the market for high-performance coherent transceiver module and pluggable opportunities remains in the early stages, and revenue has not been significant to date. Sales of our Optical Microsystems products are reflected within the Converged Packet Optical product line of our Networking Platforms segment.
Routing and Switching. Effective as of the beginning of fiscal 2021, we renamed our “Packet Networking” product line “Routing and Switching.” Our Routing and Switching portfolio includes products and solutions that enable next-generation metro, access and aggregation or “edge” networks, including solutions that allow customers to simplify their network designs while delivering new, revenue-generating services. These products route, aggregate and switch packet-based traffic to support such applications as IP services, Ethernet business services, cell site routing, mobile cross-haul, converged haul and services, Fiber Deep, and consumer/residential access, as well as ongoing network infrastructure scaling. Our Routing and Switching products are based on our Adaptive IP approach, which delivers end-to-end IP-based services in an automated and more simplified manner than traditional IP network designs. Our Routing and Switching products enable operators to achieve improved network cost effectiveness, including reduced costs associated with power and space, as compared to more complex, traditional IP routing.

Our 3900 family of Service Delivery Platforms and our 5000 family of Service Aggregation Platforms support network access and aggregation, respectively, and have been principally deployed to support IP and Ethernet business services and wireless front haul, backhaul and mid-backhaul applications. Our 3900 family of platforms are purpose-built to fit small to large customer sites as well as multi-tenant office and residential buildings and edge office or outside plant applications. They also allow customers to migrate toward software-based networking and services based on NFV. Our 5000 family provides aggregation to fill higher capacity links within both the metro access and aggregation tiers of networks, allowing operators to reduce the number of router assets required in the core and to better implement edge cloud architectures.
Our 6500 Packet Transport System (“PTS”) combines packet switching, control plane operation and integrated optics. Together with our 3900 platforms, PTS enables our service provider customers to migrate their legacy TDM (SONET/SDH/PDH) services to a scalable, lower operational cost packet solution.
Our 8100 Coherent IP networking platforms combine high capacity IP routing and switching with high capacity coherent optical transport technologies for next-generation metro and edge applications.
Our Routing and Switching portfolio also includes our 8700 Packetwave Platform, a multi-terabit packet switching platform for high-density metro networks and inter-data center wide area networks. The 8700 combines packet switching and coherent WaveLogic DWDM optical transport technologies for both data center networks and metro networks.
Employed within our Routing and Switching platforms is our SAOS, which provides the software-based IP capabilities to support 5G, IP VPN services, access, PON, converged interconnect network (CIN) architectures, coherent optical transport, and NFV.
Our Routing and Switching portfolio will also include the Vyatta virtual routing and switching technology that we acquired from AT&T in the first quarter of fiscal 2022.
Platform Software and Services
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Our software offerings also include our Platform Software, which provides domain control management, analytics, data and planning tools to assist customers in managing our Networking Platforms products in their networks, including by creating more efficient operations and more proactive visibility into their networks. Our Platform Software includes:
Manage, Control and Plan. MCP software provides intelligent network control of our routing, switching and optical solutions, enabling simplification, acceleration and automation of multi-layer network operations. Our suite of MCP applications integrate software control and analytics applications in a unified interface which provides network performance data. Our MCP domain controller provides fault, configuration, accounting, performance and security (“FCAPS”) management for multi-layer networks, in combination with services management and online network planning. MCP simplifies multi-layer lifecycle operations – including equipment commissioning, service provisioning, service assurance and performance monitoring. MCP provides this functionality for Ciena-developed products as well as a number of products developed by other vendors where they form a unified solution. Through our suite of MCP applications and open APIs, MCP software can integrate into network operators’ Operational Support Systems (“OSS”) and business processes, supporting our customers’ journey towards automation of end-to-end operational workflows.
Platform Software Services. To complement our Platform Software portfolio, we offer a range of related services that include software subscription services, consulting, network migration and integration, installation and upgrade support services, and technical support relating to our Platform Software offerings. These services are focused on enabling our customers to operate their Ciena networks most efficiently, and to modernize their operations.
Our Platform Software offering also includes planning tools and a number of legacy software solutions, including our OneControl unified management system, that support our installed base of network solutions. As we achieve further customer adoption of our MCP software platform, and as we transition features, functionality and customers to that platform, we expect revenue to decline for our legacy Platform Software solutions.
Blue Planet Automation Software and Services
Our Blue Planet Automation Software is a comprehensive, cloud native, and standards-based software portfolio that enables customers to realize digital transformation through the automation of the services lifecycle. Our Blue Planet applications are open and modular, and can be deployed either individually or in any combination. These applications include:

Multi-Domain Service Orchestration (MDSO). Network infrastructures are comprised of multiple technology layers and domains – such as the data center, cloud, metro, access and core networks – and it is often complex for network operators to offer end-to-end services in this environment. Blue Planet enables service orchestration across multiple physical and virtual network domains, multiple layers (Optical, Ethernet, IP and Mobile) and multiple hardware and software vendors.
Inventory (“BPI”). By integrating or “federating” data from multiple inventory systems and presenting it in a single dynamic view, BPI allows real-time visibility into the topology and status of network and service resources from end to end. Integrating with legacy operation support systems (“OSS”), BPI helps network providers simplify key operational processes such as service fulfillment, network planning and service assurance.
Route Optimization and Analysis (“ROA”). ROA combines routing, traffic and performance analytics for real-time monitoring of IP services across the cloud. These capabilities enable troubleshooting of latent or transient network problems and modeling to predict the impact of network infrastructure, service and workload changes to build more resilient networks.
NFV Orchestration (“NFVO”). Blue Planet provides NFV management and orchestration capabilities for creating and managing virtualized network functions and data center resources. NFVO uses an open, vendor-agnostic approach that allows network operators to select and scale those virtual network functions (“VNFs”) they wish to offer to customers.
Unified Assurance & Analytics (“UAA”). UAA leverages multi-layer/multi-domain assurance and AI-powered analytics to provide insights into the health and performance of network resources and services, ensuring an end-customer quality of experience and availability to meet dynamic service demands.
Blue Planet Services. To complement our software portfolio, we offer a range of related services that include professional services for solution customization and OSS integration, software and solution support services, consulting and design, and technical support relating to our software offerings. These services are focused on enhancing network automation and network analytics, enabling multi-vendor integration and support, and implementing programmable multi-domain next-generation networks.
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The Blue Planet Automation Software portfolio when used together allows operators to fulfill services rapidly and to meet end-customer quality-of-experience expectations via an entire services lifecycle approach, thus accelerating network operators towards their vision of self-healing and self-optimizing closed loop automation. Our entrance into the market relating to these software automation capabilities remains in the early stages and, as such, revenue from our Blue Planet Automation Software and Services segment continues to represent a relatively small portion of our total revenue.
Global Services
To complement our Networking Platforms portfolio, we offer a broad suite of value-added services that help our customers to build, operate and improve their networks. We believe that our services offerings and our close collaboration with our customers provide us with valuable insight into the network and business challenges they face, allowing us to provide services to meet their desired business outcomes. We have completed a multi-year transformation process to enhance our service delivery capabilities, reorganizing our resources into regional service delivery and customer success functions to better serve our customers, and streamlining our services cost structure. At the same time, we have broadened our services portfolio to include additional advanced services, including network migration and transformation, optimization, and multi-vendor service capabilities. Through these transformation initiatives, we believe that we can improve the cost model of our services offerings and drive greater business value for our customers.
Our Global Services portfolio includes a range of offerings to meet customer needs and maximize their network infrastructure investment throughout the network lifecycle. These include:
Build. Consulting and network design services to enhance network performance or migrate to next-generation infrastructures, implementation services to facilitate proper planning and design, installation and deployment services, and systems integration services to integrate third-party solutions;
Operate. Maintenance services that provide end-to-end support for network hardware and software, and managed services to provide management of network infrastructure operations; and
Improve. Optimization services designed to ensure that networks are running at peak performance, and training services designed to enable customers to better understand and operate their networks.
These services are delivered using a combination of our internal services resources, technical support engineers, and qualified and authorized third-party service partners.
Product Development
To remain competitive, we must continually invest in and enhance our solutions offerings, addressing new market opportunities, adding new features and functionality and ensuring alignment with market demand. Our product development efforts seek to design and bring to market solutions that leverage our Adaptive Network vision to make our customers’ networks more adaptive through further advances in programmable systems and software, analytics, and control and automation. Through our development efforts, we seek to support network operators as they pursue new business models and sources of revenue from their network infrastructure, and to achieve improved economics and return on their network infrastructure investment. We seek to develop products aimed at optimizing price for performance, power consumption, space requirements, service enablement, lifecycle operating costs and the environmental impact of their network operations. Our approach is also focused on designing products that address a range of emerging consumption models for networking solutions. Our current development efforts are focused on:
Reinforcing our coherent optical leadership with continued development that advances reach, transmission speed and spectral efficiency, including by leading in intelligent photonics;
Executing on parallel innovation paths for our next generation modem technology, including expanding our WaveLogic 5 Nano offerings;
Delivering on the Adaptive IP approach and extending the IP/routing capabilities and use cases of our Routing and Switching solutions to support mobile network cross-haul, edge cloud, and network densification and virtualization initiatives, such as 5G, Fiber Deep and residential access;
Pursuing development to address different consumption models, including our module, pluggable, component, disaggregated IP NOS and VNF development initiatives;
Enhancing our Adaptive Network vision through advances in hardware programmability and software-based domain control, automation and analytics through MCP and purpose-built applications; and
Advancing our software-led transformation strategy and product development for our Blue Planet Automation Software to enable generation OSS transformation and closed loop automation.
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Our research and development efforts are also geared toward portfolio optimization and engineering changes intended to drive product and manufacturing cost reductions across our platforms.
We regularly review our existing solutions offerings and prospective development of new components, features or products in order to determine their fit within our portfolio and broader corporate strategy. We also assess the market demand, technology evolution, prospective return on investment and growth opportunities, as well as the costs and resources necessary to develop and support these products. To ensure that our product development investments and solutions offerings are closely aligned with market demand, we continually seek input from customers and promote collaboration among our product development, marketing and sales organizations. In some cases, where we seek to utilize or gain access to complementary or emerging technologies or solutions, we may obtain technology through an acquisition or, alternatively, through initiatives with third parties pursuant to technology licenses, original equipment manufacturer (OEM) arrangements and other strategic technology relationships or investments. In addition, we participate in industry and standards organizations and, where appropriate, incorporate information from these affiliations throughout the product development process.
Customer Engagement
Our Global Customer Engagement organization includes a direct sales presence that is organized geographically around the following markets: (i) the United States, Canada, the Caribbean and Latin America (“Americas”); (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia Pacific, Japan and India (“APAC”). Within each geographic area, we maintain specific teams or personnel that focus on a particular region, country, customer or market vertical, or portfolio. These teams include sales management, account salespersons and sales engineers, as well as partner resources, field marketing, services professionals and commercial management personnel, who ensure that we maintain a high-touch, consultative relationship with our customers.
We also maintain a global partner program that includes distributors, resellers, systems integrators, service providers and other third-party distributors who market and sell our products and services. We utilize these third-party channel partners to market and sell our solutions into specific geographies, applications or customer verticals. We believe there are opportunities to leverage these relationships to expand our addressable market, while at the same time reducing the financial and operational risk of entering additional markets. For third parties in our Ciena Partner Network, we maintain a code of conduct that is available on our website and that sets forth our expectations for the high standards of ethical and legally compliant conduct we require of them in supporting our business.
To support our global customer engagement efforts, we invest in marketing activities to generate demand for our products and services. Our marketing strategy is highly focused on building our brand to create customer preference for Ciena, engaging in thought leadership programs to illustrate how our innovations solve customer business problems, and enabling our sales teams to drive customer adoption of our solutions. Our marketing team supports our sales efforts through a variety of activities, including direct customer interaction, account-based marketing campaigns, portfolio marketing, industry events, media relations, industry analyst relations, social media, trade shows, our website and other marketing vehicles for our customers and channel partners.
Operations and Supply Chain Management
Our operations personnel manage the relationships with our third-party manufacturers and global supply chain, addressing component sourcing, manufacturing, product testing and quality, and fulfillment and logistics relating to the distribution and support of our products.
We utilize a sourcing strategy that emphasizes global procurement of materials and product manufacturing in lower cost regions. We rely upon third-party contract manufacturers, including those with facilities in Canada, Mexico, Thailand and the United States, to manufacture, support and ship our products, and therefore are exposed to risks associated with their businesses, financial condition and the geographies in which they operate, including political risk, changes in tax and trade policy involving such countries, and physical risk, including the impact of climate change in such geographies. We also rely upon contract manufacturers and other third parties to perform design and prototype development, component procurement, full production, final assembly, testing and distribution operations. Our manufacturers procure components necessary for assembly and manufacture of our products based on our specifications, approved vendor lists, bills of materials and testing and quality standards. Our manufacturers’ activity is based on rolling forecasts that we provide to them to estimate demand for our products. We work closely with our manufacturers and suppliers to manage material, quality, cost and delivery times, and we continually evaluate their services to ensure performance on a reliable and cost-effective basis. Generally, our agreements with our supply chain and contract manufacturers are frame agreements against which we place purchase orders and do not represent long-term commitments.
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We currently use distribution partners to fulfill and deliver our products. We believe that our sourcing, manufacturing and distribution strategies allow us to conserve capital, lower costs of product sales, adjust quickly to changes in market demand and operate without dedicating significant resources to manufacturing-related plant and equipment.
We continue to focus on a range of initiatives that seek to optimize our operations, improve our resiliency, and drive cost reductions. We seek to balance these goals through our sourcing and supply chain strategy, outsourcing and use of lower cost geographies. Our efforts also include process optimization initiatives, such as vendor-managed inventory, and other operational models and strategies designed to drive improved efficiencies in our sourcing, production, logistics and fulfillment.
We actively work with our third-party vendors and business partners to promote socially responsible business practices within our own business and those within our global supply chain. To that end, we have adopted the principles set forth in the Responsible Business Alliance (“RBA”) Code of Conduct. The RBA Code of Conduct establishes standards that aim to ensure working conditions in the electronics industry, or industries in which electronics are a key component, and its supply chains are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible and conducted ethically. We promote these principles and require our suppliers to adhere to these same standards. We also publish a Sustainability Report, which includes more detail about our efforts to promote responsible business practices.
For a discussion of actions taken to manage through the ongoing global supply chain constraints, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Overview - Supply Chain Constraints” in Item 7 of Part II of this report.
Seasonality
Like other companies in our industry, we experience quarterly fluctuations in customer activity due to seasonal considerations. We typically experience reductions in order volume toward the end of the calendar year, as the procurement cycles of some of our customers slow and network deployment activity by service providers is curtailed. This period coincides with the first quarter of our fiscal year. This seasonality in our order flows has often resulted in weaker revenue results in the first quarter of our fiscal year. These seasonal effects may not apply consistently in future periods and may not be a reliable indicator of our future revenue or results of operations.
Competition
Competition among networking solution vendors remains intense on a global basis. The markets in which we compete are characterized by rapidly advancing technologies, frequent introduction of new solutions and aggressive selling efforts, including using significant pricing pressure to displace incumbent vendors and capture market share. Competition for sales of networking solutions, including our Networking Platforms and Platform Software and Services, is dominated by a small number of very large, multi-national companies. Our competitors include Huawei, Nokia, Cisco, Juniper Networks and ZTE. As compared to us, many of these competitors have substantially greater financial, operational and marketing resources, significantly broader product offerings and more established relationships with service providers and other customer segments. Because of their scale and resources, they may be perceived to be a better fit for the procurement or network strategies of larger network operators. We also continue to compete with several smaller but established companies that offer one or more products that compete directly or indirectly with our offerings or whose products address specific niches within the markets and customer segments we address. These competitors include Infinera, ADVA and Ribbon Communications. We also compete with a number of companies that provide significant competition for a specific product, application, service, customer segment or geographic market.

Keeping pace with the market’s demands for technology innovation requires considerable research and development investment capacity. As a result, some of our competitors, both large and small, have chosen to rely upon component and module technology developed by and procured from third-party providers, including NTT Electronics (“NEL”), Marvell Technology Group (which acquired Inphi) and Cisco (which acquired Acacia Communications). We may compete with these providers, either indirectly as a result of their technology being a key enabling technology for our competitors or an alternative consumption model such as “whitebox” technology, or directly in module, pluggable and component sales opportunities.
As we promote our corporate strategy and seek increased customer adoption of our Blue Planet Automation Software, we expect to compete more directly with software vendors and traditional IT services vendors. Competitors for our Blue Planet Automation Software include Cisco, Nokia, Amdocs, Netcracker and Ericsson.
Across our markets and segments, the principal competitive factors can include, among others:
the ability to meet business needs and drive successful outcomes;
functionality, speed, capacity, scalability and performance of network solutions;
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price for performance, cost per bit and total cost of ownership of network solutions;
incumbency and strength of existing business relationships;
technology roadmap and forward innovation capacity, including the ability to invest significant sums in research and development;
time-to-market in delivering products and features;
company stability and financial health;
ability to offer comprehensive networking solutions, consisting of hardware, software and services;
flexibility and openness of platforms, including ease of integration, interoperability and integrated management;
ability to offer solutions that accommodate a range of different consumption models;
operating costs, space requirements and power consumption of network solutions;
software and network automation capabilities;
ability to manage challenging supply chain environments, including manufacturing and lead-time capability; and
services and support capabilities.
As a result of the highly competitive environment in which we operate, winning new opportunities can often require that we agree to unfavorable commercial terms or pricing and other onerous contractual commitments. In so doing, our expectation is that we can recover or improve the economics of such relationships over time. However, these terms can adversely affect our results of operations in any period. These terms can also lengthen our revenue recognition or cash collection cycles, add start-up costs to initial sales or deployment of our solutions, require financial commitments or performance bonds, and place a disproportionate allocation of risk upon us.
Our competitive landscape has been and is likely to continue to be impacted by pending international trade and related matters, in particular between the U.S. and China. For example, in May 2019, the U.S. Department of Commerce amended the Export Administration Regulations by adding Huawei Technologies Co., Ltd. and certain affiliates to the “Entity List,” resulting in significant new restrictions on export, reexport and transfer of U.S. regulated technologies and products to Huawei. In August 2020, the U.S. Department of Commerce added additional Huawei affiliates to the Entity List, confirmed the expiration of a temporary general license applicable to Huawei, and amended the foreign direct product rule under the U.S. Export Administration Regulations in a manner that significantly expanded its application to Huawei. Separately, the U.S. has taken steps to restrict federal agencies from doing business with, and U.S. wireless carriers from using federal subsidies to buy equipment from, Huawei and ZTE. The U.S. has also encouraged other governments to consider similar restrictions. These actions have resulted in escalating tensions between the United States and China and introduce a risk that the Chinese government may take additional steps to retaliate against U.S. industries or companies.
We also expect the competition in our industry to continue to broaden and to intensify as network operators pursue a diverse range of network strategies and consumption models. As these changes occur, we expect that our business will overlap more directly with additional networking solution suppliers, including IP router vendors, data center switch providers and other suppliers or integrators of networking technology traditionally geared toward different network applications, layers or functions. We may also face competition from system and component vendors, including those in our supply chain, who develop pluggable modem technology or other networking products based on off-the-shelf or commoditized hardware technology, referred to as “white box” hardware, particularly where a customer’s network strategy seeks to emphasize deployment of such product offerings or to adopt a disaggregated approach to the procurement of hardware and software.
Patents, Trademarks and Other Intellectual Property Rights
The success of our business and technology leadership depends significantly on our proprietary and internally developed technology. We rely upon the intellectual property protections afforded by patents, copyrights, trademarks and trade secret laws to establish, maintain and enforce rights in our proprietary technologies and product branding. We regularly file applications for patents and have a significant number of patents in the United States and other countries where we do business. As of December 1, 2021, we had approximately 2,000 issued patents and more than 500 pending patent applications worldwide.
Enforcing proprietary rights, especially patents, can be costly, and we cannot be certain that the steps that we are taking will detect, prevent, or minimize the risks of all unauthorized use. The industry in which we compete is characterized by rapidly changing technology, a large number of patents, and frequent claims and related litigation regarding patent and other intellectual property rights. We have been subject to several claims related to patent infringement, and we have been requested to indemnify customers pursuant to contractual indemnity obligations relating to infringement claims made by third parties. Intellectual property infringement assertions could cause us to incur substantial costs, including settlement costs and legal fees in the defense of related actions. If we are not successful in defending these claims, our business could be adversely affected.
Our operating system software, Platform Software, Blue Planet Automation Software and other solutions incorporate software and components under licenses from third parties, including software subject to various open source software licenses.
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Failure to obtain or maintain such licenses or other third-party intellectual property rights could affect our development efforts and market opportunities, or could require us to re-engineer our products or to obtain alternate technologies. Moreover, there is a risk that open source and other technology licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products.
Governmental Regulations
Environmental Matters
Our business and operations are subject to environmental laws in various jurisdictions around the world, including the Waste Electrical and Electronic Equipment (WEEE) and Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) regulations adopted by the European Union (the “EU”). We are also subject to disclosure and related requirements that apply to the presence of “conflict minerals” in our products or supply chain. We seek to operate our business in compliance with applicable laws relating to the materials and content of our products and product takeback and recycling. Environmental regulation is increasing, particularly outside of the United States, and we expect that our domestic and international operations may be subject to additional environmental compliance requirements, which could require us to incur additional costs. To date, our compliance actions and costs relating to environmental regulations have not resulted in a material cost or effect on our capital expenditures, earnings or competitive position.
Our innovation efforts and our environmental sustainability initiatives are closely linked. Our product development efforts focus on allowing network operators to continually “do more with less.” We promote environmental sustainability through our efforts to improve the energy efficiency per gigabit of throughput in our high-performance networking solutions, as well as our initiatives to improve power, space and cooling requirements, and to reduce the total number of network elements required to operate a network. We pursue opportunities to minimize the resource impacts in our product design and sourcing, and to assess and improve efficiencies over the life cycle of our products, including packaging and distribution, and end-of-life reuse, refurbishment, and recycling. We make CDP climate change and water disclosures and are a member of the RBA. We have adopted, and seek to ensure that our key direct suppliers adopt, the standards and principles set forth in the RBA Code of Conduct.
Other Regulations

As a company with global operations, we are subject to complex foreign and U.S. laws and regulations, including trade regulations, tariffs, import and export regulations, anti-bribery and corruption laws, antitrust or competition laws, data privacy laws, such as the EU General Data Protection Regulation (the “GDPR”), and environmental regulations, among others. We have policies and procedures in place to promote compliance with these laws and regulations. To date, our compliance actions and costs relating to these laws, rules and regulations have not resulted in a material cost or effect on our capital expenditures, earnings or competitive position. Government regulations are subject to change, and accordingly we are unable to assess the possible effect of compliance with future requirements or whether our compliance with such regulations will materially impact our business in the future. For further discussion of how government regulations may affect our business, see the related discussion in “Risk Factors – Risks Related to Intellectual Property, Litigation, Regulation and Government Policy.”
People and Culture
Our technology solutions are developed, marketed, sold and supported by the talented individuals that make up our 7,241 person global workforce as of October 30, 2021, over 99% of whom were full-time employees. We have a broad base of talent in more than 35 countries, with approximately 59% in the Americas, 33% in APAC, and 8% in EMEA, the majority of whom are in engineering, operations or sales roles.
We understand that our industry and innovation leadership is ultimately rooted in people. Competition for qualified personnel in the technology space is intense, and our success depends in large part on our ability to recruit, develop and retain a productive and engaged workforce. Accordingly, investing in our employees and their wellbeing, offering competitive compensation and benefits, and adopting progressive human capital management practices constitute a core element of our corporate strategy.
Our Board of Directors oversees our corporate strategy, which includes management’s design and execution of our “people strategy.” This strategy seeks to ensure that we continue to attract and retain the talent necessary to execute on our business plans, and that we have programs, initiatives, rewards and recognition that are well aligned and support these goals. We launched our “People Promise” during fiscal 2020 and honor this promise by promoting a workplace environment where our employees are empowered, feel included and have an opportunity to make a difference through their work at Ciena. In doing so, we seek to cultivate for employees a culture of vibrancy, belonging and happiness, while enabling us to be an attractive
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employer of choice within our markets. Our executive team is actively involved in and sponsors key initiatives and employee resource groups intended to promote this corporate culture. To that end, our people strategy is focused on the following:
Promote Belonging through Diversity and Inclusion Initiatives. We promote an inclusive and diverse workplace, where all individuals are respected and feel they belong regardless of their age, race, national origin, gender, religion, disability, sexual orientation or gender identity through recruiting outreach, internal networking and resource groups, inclusivity networks, and mentoring programs. As of October 30, 2021, our global workforce was approximately 20.6% female. Our Board of Directors is 30% female and 20% ethnically diverse. As of December 31, 2020, in the U.S., where we are headquartered, our approximately 1,700 employee workforce approximately reflected the following ethnicities: 64.6% White, 22.5% Asian, 6.0% Hispanic or Latino, 4.4% Black or African American, 2.0% two or more races (Not Hispanic or Latino), and 0.5% additional groups (including American Indian, Alaska Native, Native Hawaiian or Other Pacific Islander). We are deeply committed to increasing diversity in our workforce at all levels, and regularly monitor our recruitment process with an aim to improve the diversity of our workforce and candidate pool. Our commitment to providing an inclusive workplace is demonstrated through the introduction of our Conscious Inclusion Workshops which have had 100% participation by our executive leadership and 58% by our managers as of the end of fiscal 2021. In addition, we support multiple active internal networking and resource groups, including our Women@Ciena group, Black & African Heritage group, Pride@Ciena LGBT+ group, and our Ciena Next early in career group, and we launched our LatinX group in fiscal 2021. In fiscal 2021, we also ran an eight-month targeted development pilot with our Black & African Heritage group, aimed at strengthening individuals’ sense of belonging and enhancing communication and financial acumen. We also maintain a global Inclusivity Council, which is led by two of our executives and aims to address actions for inclusion, and we have signed The CEO Action for Diversity & Inclusion.

Support Employee Wellbeing and Engagement. We prioritize supporting the overall wellbeing of our employees from a physical, mental and emotional, financial and social perspective. We also regularly seek input from employees, including through employee engagement and pulse surveys on specific issues that are intended to assess our degree of success in promoting an environment that supports our People Promise and measure our culture of compliance and employee comprehension of our business goals. Our fiscal 2021 employee engagement survey had a participation rate of approximately 75% and resulted in engagement scores across all indexes that met or exceeded industry benchmarks. Our global wellbeing program includes a long-standing practice of remote and flexible working arrangements, flexible paid time off in many of our geographies, life planning and retirement readiness programming, wellness platforms and expense reimbursement benefits, fitness challenges and rewards, 24x7 crisis support and employee assistance program, and mental health coaching.
Offer Competitive Compensation and Ensure Pay Equity. We strive to ensure that our employees receive competitive, fair and transparent compensation and progressive benefits offerings. We conduct an annual pay fairness assessment of gender globally and of ethnicity in the U.S. and Canada, and take action to ensure we are paying individuals performing similar work equitably, and recently adopted analytic software to enable better global pay fairness assessments. To align performance and stockholder interest, we base our annual incentive compensation on both business and individual performance, we maintain an employee stock purchase plan and we have provided broader employee opportunities for equity compensation in recent years. We also offer competitive family leave, including global family leave to support employees throughout various life stages, carer’s leave, bereavement leave, parental leave that includes a minimum of 18 weeks paid time off for new mothers (including eight weeks recovery and ten weeks bonding) and ten weeks paid time off for new fathers and adoptive parents, and financial assistance for adoptive parents. We offer meaningful retirement benefits and programming to promote retirement readiness among our employee base. In recent years, we have enhanced employer contributions to our North America retirement plans, added our first ESG fund option for employees and, as of October 30, 2021, greater than 99% of our eligible employees in the U.S. and Canada were participating in our defined contribution retirement plans.
Provide Programs for Employee Recognition. We also offer rewards and recognition programs to our employees, including awards to recognize employees who best exemplify our core values, “applause” and spot awards to recognize employee contributions, patent incentive and distinguished engineer awards, and awards recognizing employees who exemplify our commitment to our communities and volunteerism. We believe that providing these recognition programs helps drive strong employee performance.
Create Opportunities for Growth and Development. As of October 30, 2021, approximately 19% of our employees are “early in career,” or age 30 and under, 53% are “mid-career,” or age 31 to 50, and 28% are “late in career,” or age 51 and over. We focus on creating opportunities for employee growth, development, training and education at all career stages, including opportunities to cultivate talent and identify candidates for new roles from within the company, early in career and new graduate networking and development programs, management and leadership development programs, mentoring programs, and support for continuing education through tuition reimbursement. We also operate
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a leadership succession planning process that aims to develop and retain key talent and ensure business continuity for key roles.
Promote Community Outreach and Support. We believe it is important to give back and promote community outreach and support through corporate giving, charitable matching, and employee volunteerism in the communities in which we live and work. Through our “Ciena Cares” community program, we provide corporate matching of employee charitable donations, flexible volunteering during work time, and corporate rewards for service hours that can be donated by employees. In fiscal 2020, we launched our digital inclusion initiative, which aims to mobilize our global workforce, leverage our innovation leadership, and collaborate with customers, suppliers and other partners to bridge the digital divide. Through this initiative, we have funded programming to support underserved students in our global communities by emphasizing digital inclusion and equity through greater connectivity, access to enabling technologies and digital skills development. We have also partnered with Tree-Nation by planting a tree for each existing and new employee at Ciena.
Promote a Strong Ethical Business Culture. We believe that commitments to good corporate governance and the highest ethical standards are essential to our long-term success, and are dedicated to instilling in our employees a commitment to integrity and business ethics. We maintain a Code of Business Conduct and Ethics that sets standards of conduct for Ciena’s directors, officers and employees. All employees are required to complete training on our Code of Business Conduct and Ethics, and we conduct recurring employee affirmations with respect to our Code of Business Conduct and Ethics and periodic training and communication related to specific topics contained therein. In addition, we maintain a Corporate Compliance Committee that promotes integrity and compliance leadership throughout Ciena, and in 2020 we created and resourced a new dedicated function focused exclusively on Compliance and Ethics. We also maintain several easily accessible internal and external methods by which our employees, business partners, and investors can report concerns relating to the ethical operation of our business, including anonymously where permitted. We conduct surveys of all employees on our compliance program and culture of integrity in order to assess and strengthen our culture and practices and received feedback from approximately 75% of our employees in fiscal 2021.
Response to the COVID-19 Pandemic. In response to the COVID-19 pandemic, we have prioritized the safety of our employees and business partners, while continuing to support the needs of our customers and communities during this unprecedented period.
Employees. As of the end of fiscal 2021, most of our offices remain closed with limited exceptions or for certain geographies where conditions and local regulations permit, or for a small number of employees in certain key roles. We have adopted a comprehensive set of global site reopening guidelines, which specify the requirements for and limited circumstances under which we will consider reopening one or more of our offices during the ongoing pandemic. Since the onset of the pandemic, most of our employees have worked from home on a regular basis, using digital platforms and virtual collaboration tools to maintain productivity and to remain in contact with one another and our business partners. To support and protect our employees, we have also: instituted travel bans and restrictions and taken meaningful precautions in accordance with relevant guidelines to protect the health and safety of the small number of employees who need to be in offices, laboratory environments or at customer or partner sites to perform their roles. We have adopted new employee benefits and wellbeing initiatives, including physical, emotional, mental, and social programming, global pandemic leave, and work from home reimbursement benefits. We have also hosted regular mental wellbeing sessions, internal communication and morale initiatives, and launched new wellbeing platforms that focus on the mental and emotional health needs of our employees during this time.
Community. In an unprecedented time, we and our global workforce have focused on service and compassion. We have undertaken a range of volunteering and charitable actions to support our neighbors and communities. Among other things, during fiscal 2021 we adopted an enterprise-level goal for our employees to volunteer and provide service to their communities. We have also created and advanced a new community initiative focused on promoting digital inclusion, providing greater opportunities for underserved students through improved access, technology and digital skills, and have undertaken joint community projects with business partners as part of this program.

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Information About Our Directors and Executive Officers
The table below sets forth certain information concerning our directors and executive officers:
NameAgePosition
Patrick H. Nettles, Ph.D.78 Executive Chairman of the Board of Directors
Gary B. Smith61 President, Chief Executive Officer and Director
Stephen B. Alexander62 Senior Vice President and Chief Technology Officer
Rick L. Hamilton50 Senior Vice President, Blue Planet Software
Scott A. McFeely58 Senior Vice President, Global Products and Services
James E. Moylan, Jr.70 Senior Vice President and Chief Financial Officer
Andrew C. Petrik58 Vice President and Controller
Jason M. Phipps49 Senior Vice President, Global Customer Engagement
David M. Rothenstein53 Senior Vice President, General Counsel and Secretary
Mary Yang53 Senior Vice President and Chief Strategy Officer
Hassan M. Ahmed, Ph.D. (1)(3)63 Director
Bruce L. Claflin (1)(2)70 Director
Lawton W. Fitt (2)68 Director
Patrick T. Gallagher (1)(3)66 Director
Devinder Kumar (2)66 Director
T. Michael Nevens (2)72 Director
Judith M. O’Brien (1)(3)71 Director
Joanne B. Olsen (1)(3)63 Director
_________________________________
(1)Member of the Compensation Committee
(2)Member of the Audit Committee
(3)Member of the Governance and Nominations Committee

Our Directors hold staggered terms of office, expiring as follows: Ms. Fitt, Mr. Kumar and Dr. Nettles in 2022; Ms. O’Brien, Ms. Olsen and Mr. Smith in 2023; and Dr. Ahmed, Mr. Claflin, Mr. Gallagher and Mr. Nevens in 2024.
Patrick H. Nettles, Ph.D. has served as a Director of Ciena since April 1994 and as Executive Chairman of the Board of Directors since May 2001. From October 2000 to May 2001, Dr. Nettles was Chairman of the Board of Directors and Chief Executive Officer of Ciena, and he was President and Chief Executive Officer from April 1994 to October 2000. Dr. Nettles serves as a Trustee for the California Institute of Technology. Dr. Nettles previously served on the boards of directors of Axcelis Technologies, Inc., where he was independent chairman of the board, The Progressive Corporation, where he was chair of the audit committee, Apptrigger, Inc., which was formerly known as Carrius Technologies, Inc., and Optiwind Corp, and previously served as a Trustee for the Georgia Tech Foundation, Inc.
Gary B. Smith joined Ciena in 1997 and has served as President and Chief Executive Officer since May 2001. Mr. Smith has served on Ciena’s Board of Directors since October 2000. Prior to his current role, his positions with Ciena included Chief Operating Officer and Senior Vice President, Worldwide Sales. Mr. Smith previously served as Vice President of Sales and Marketing for INTELSAT and Cray Communications, Inc. Mr. Smith previously served on the boards of directors of CommVault Systems, Inc. and Avaya Inc. Mr. Smith is a member of the President’s National Security Telecommunications Advisory Committee, the Global Information Infrastructure Commission and the Center for Corporate Innovation (CCI).
Stephen B. Alexander joined Ciena in 1994 and has served as Chief Technology Officer since September 1998 and as a Senior Vice President since January 2000. Mr. Alexander has previously served as General Manager of Products and Technology and General Manager of Transport and Switching and Data Networking.
Rick L. Hamilton joined Ciena in October 2016 and has served as Senior Vice President, Blue Planet Software since February 2017. Mr. Hamilton is responsible for managing Ciena’s Blue Planet Automation Software and Services portfolio. Mr. Hamilton previously served as Senior Vice President, Global Services & Automation. Prior to joining Ciena, he served as Corporate Vice President, Professional Services for Juniper Networks from January to October 2016. From January 2004 to
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December 2015, Mr. Hamilton served with Cisco Systems in various services leadership positions, including most recently as Vice President, Cloud & Managed Services.
Scott A. McFeely joined Ciena in March 2010 and has served as Senior Vice President, Global Products and Services since May 2018. Mr. McFeely is responsible for all aspects of Ciena’s networking portfolio including research and development activities relating to its Converged Packet Optical and Routing and Switching portfolios, Platform Software and Services, product line management, supply chain operations, and Global Services. From November 2015 to May 2018, Mr. McFeely served as Senior Vice President, Networking Platforms and became an executive officer in February 2017. From March 2010 to October 2015, he served as Vice President, Global Portfolio Management and Business Operations. Mr. McFeely joined Ciena in connection with its acquisition of Nortel’s Metro Ethernet Networks business, with which he spent more than 20 years in a variety of technical and management roles.
James E. Moylan, Jr. joined Ciena in 2007 and has served as Senior Vice President and Chief Financial Officer since December 2007.
Andrew C. Petrik joined Ciena in 1996 and has served as Vice President, Controller since August 1997. He also served as Treasurer from August 1997 to October 2008.
Jason M. Phipps joined Ciena in 2002 and has served as Senior Vice President, Global Customer Engagement (formerly titled Senior Vice President, Global Sales and Marketing) since February 2017. Mr. Phipps is responsible for Ciena’s global sales organization and its marketing and communications functions. From January 2014 to February 2017, Mr. Phipps served as Vice President and General Manager, North America Sales, during which time he also oversaw the Global Partners & Channels practice, and from March 2011 to December 2013 he served as Vice President, Global Sales Operations. Mr. Phipps has also previously held a number of sales and marketing leadership positions with Ciena.
David M. Rothenstein joined Ciena in January 2001 and has served as Senior Vice President, General Counsel and Secretary since November 2008. Mr. Rothenstein served as Vice President and Associate General Counsel from July 2004 to October 2008 and previously as Assistant General Counsel.
Mary Yang joined Ciena in April 2020 as Senior Vice President and Chief Strategy Officer. Prior to joining Ciena, she served as Vice President of Corporate and Business Development at NIO from 2016 to 2020. From 2014 to 2016, she served as Vice President of Corporate Development and Strategic Alliances at Fortinet.
Hassan M. Ahmed, Ph.D. has served as a Director of Ciena since June 2020. Dr. Ahmed most recently served as Chairman of the Board and Chief Executive Officer of Affirmed Networks, which was acquired by Microsoft in April 2020. Before founding Affirmed Networks in 2010, he was a senior advisor at Charles River Ventures. From 1998 to 2008, Dr. Ahmed served as Chairman and Chief Executive Officer of Sonus Networks. Prior to that time, he served in various executive roles at Ascend Communications, Cascade Communications and Analog Devices. He also served as President and founder of WaveAccess, and founded and served as director of the VLSI Systems Group of Motorola Codex. Dr. Ahmed previously served as Associate Professor of Electrical, Computer and Systems Engineering and Associate Professor of Finance at Boston University. Dr. Ahmed currently serves on the boards of directors of KINS Technology and Founders SPAC, both publicly traded companies, and Vesper Technologies, Inc., Oxefit, Inc., Avesha Networks, and Sway AI, all private companies.
Bruce L. Claflin has served as a Director of Ciena since August 2006. Mr. Claflin served as President and Chief Executive Officer of 3Com Corporation from January 2001 until his retirement in February 2006. Mr. Claflin joined 3Com as President and Chief Operating Officer in August 1998. Prior to 3Com, Mr. Claflin served as Senior Vice President and General Manager, Sales and Marketing, for Digital Equipment Corporation. Mr. Claflin also worked for 22 years at IBM, where he held various sales, marketing and management positions, including general manager of IBM PC Company’s worldwide research and development, product and brand management, as well as president of IBM PC Company Americas. Mr. Claflin currently serves on the board of directors of IDEXX Laboratories, Inc., a publicly traded company, where he is the Chairman of the Nominating and Governance Committee. Mr. Claflin previously served on the board of directors of Advanced Micro Devices, Inc. (“AMD”).
Lawton W. Fitt has served as a Director of Ciena since November 2000. From October 2002 to March 2005, Ms. Fitt served as Director of the Royal Academy of Arts in London. From 1979 to October 2002, Ms. Fitt was an investment banker with Goldman Sachs & Co., where she was a partner from 1994 to October 2002. Ms. Fitt currently serves on the boards of directors of The Carlyle Group Inc., The Progressive Corporation, where she serves as Chairperson of the Board, and Micro Focus International PLC, all publicly traded companies. Ms. Fitt also serves as a director or trustee of several non-profit organizations. Ms. Fitt previously served on the boards of directors of ARM Holdings PLC and Thomson Reuters Corporation.
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Patrick T. Gallagher has served as a Director of Ciena since May 2009. Since October 2007, Mr. Gallagher has served as Chairman of Harmonic Inc., a publicly traded company and global provider of high-performance video solutions to the broadcast, cable, telecommunications and managed service provider sectors. Mr. Gallagher has served as Chairman of privately held Intercloud SAS, a Paris-headquartered provider of global private cloud connectivity services, since July 2015, and as Chairman of privately held Mirabeau SAS, a French wine producer, since August 2019. From March 2008 until April 2012, Mr. Gallagher was Chairman of Ubiquisys Ltd., a leading developer and supplier of femtocells for the global 3G mobile wireless market. From January 2008 until February 2009, Mr. Gallagher was Chairman of Macro 4 plc, a global software solutions company, and from May 2006 until March 2008, served as Vice Chairman of Golden Telecom Inc., a leading facilities-based provider of integrated communications in Russia and the CIS. From 2003 until 2006, Mr. Gallagher was Executive Vice Chairman and served as Chief Executive Officer of FLAG Telecom Group and, prior to that role, held various senior management positions at British Telecom. Mr. Gallagher also previously served on the board of directors of Sollers JSC.
Devinder Kumar has served as a Director of Ciena since August 2019. Mr. Kumar currently serves as Executive Vice President, Chief Financial Officer and Treasurer of AMD, a publicly traded company, in which capacity he is responsible for their global finance organization as well as global corporate services and facilities. He was appointed Chief Financial Officer in January 2013 and Treasurer in April 2015. Since he joined AMD in 1984, Mr. Kumar has progressed through several leadership positions in corporate accounting and corporate finance, including serving as interim CFO, corporate controller and assistant treasurer. He also spent 10 years in Asia as financial controller for AMD Penang and group finance director for AMD’s Manufacturing Services Group across Singapore, Thailand, China and Malaysia.
T. Michael Nevens has served as a Director of Ciena since February 2014. Since 2006, Mr. Nevens has served as senior adviser to Permira Advisers, LLC, an international private equity fund. From 1980 to 2002, Mr. Nevens held various leadership positions at McKinsey & Co., most recently as a director (senior partner) and as managing partner of the firm’s Global Technology Practice. He also served on the board of the McKinsey Global Institute, which conducts research on economic and policy issues. Mr. Nevens has been an adjunct professor of Corporate Governance and Strategy at the Mendoza College of Business at the University of Notre Dame. Mr. Nevens also serves as the Chairman of the board of directors of NetApp, Inc., a publicly traded company, and on the board of directors of TalonX, a private company. Mr. Nevens previously served on the board of directors of Altera Corporation.
Judith M. O’Brien has served as a Director of Ciena since July 2000. From November 2012 until her retirement in December 2019, Ms. O’Brien served as a partner and head or co-head of the Emerging Company Practice Group at the law firm of King & Spalding. Ms. O’Brien served as Executive Vice President and General Counsel of Obopay, Inc., a provider of mobile payment services, from November 2006 through December 2010. From February 2001 until October 2006, Ms. O’Brien served as a Managing Director at Incubic Venture Fund, a venture capital firm. From August 1980 until February 2001, Ms. O’Brien was a lawyer with Wilson Sonsini Goodrich & Rosati, where, from February 1984 to February 2001, she was a partner specializing in corporate finance, mergers and acquisitions, and general corporate matters. Ms. O’Brien serves on the boards of directors of privately held companies Theatro Labs, Inc., MagicCube, Inc., and LightDeck Diagnostics, Inc. Ms. O’Brien also previously served on the boards of directors of Adaptec, Inc. and Inform, Inc.
Joanne B. Olsen has served as a Director of Ciena since October 2018. Ms. Olsen previously served as Executive Vice President of Global Cloud Services and Support at Oracle from 2016 until her retirement in August 2017. In that role, she drove Oracle’s cloud transformation services and support strategy, partnering with leaders across all business units. Ms. Olsen previously served as Senior Vice President and leader of Oracle’s applications sales, alliances, and consulting organizations in North America from 2012 through 2016, and from 2010 through 2012 served in various general management positions at Oracle. Ms. Olsen began her career with IBM, where, between 1979 and 2010, she held a variety of executive management positions across sales, global financing and hardware. Ms. Olsen also serves on the boards of directors of Teradata Corporation and Keysight Technologies, Inc., both publicly traded companies.

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Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. In addition to the other information contained in this report, you should consider the following risk factors before investing in our securities.
Risks Related to Our Business and Industry
Our revenue, gross margin and operating results can fluctuate significantly and unpredictably from quarter to quarter.
Our revenue, gross margin and results of operations can fluctuate significantly and unpredictably from quarter to quarter. Our budgeted expense levels are based on our visibility into customer spending plans and our projections of future revenue and gross margin. Visibility into customer spending levels can be uncertain, spending patterns are subject to change, and reductions in our expense levels can take significant time to implement. A significant portion of our quarterly revenue is generated from customer orders received during that same quarter (which we refer to as “book to revenue”). Accordingly, our revenue for a particular quarter is difficult to predict, and a shortfall in expected orders in any given quarter can materially adversely affect our revenue and results of operations for that quarter or future quarterly periods. Additional factors that contribute to fluctuations in our revenue, gross margin and operating results include:

changes in spending levels or network deployment plans by customers, particularly with respect to our service provider and Web-scale provider customers;
order timing and volume, including book to revenue orders;
shipment and delivery timing;
backlog levels;
the level of competition and pricing pressure in our industry;
the pace and impact of price erosion that we regularly encounter in our markets;
the impact of commercial concessions or unfavorable commercial terms required to maintain incumbency or secure new opportunities with key customers;
the mix of revenue by product segment, geography and customer in any particular quarter;
our level of success in achieving targeted cost reductions and improved efficiencies in our supply chain;
our incurrence of start-up costs, including lower margin phases of projects required to support initial deployments, gain new customers or enter new markets;
our level of success in accessing new markets and obtaining new customers;
long- and short-term changing behaviors or customer needs that impact demand for our products and services or the products and services of our customers;
technology-based price compression and our introduction of new platforms with improved price for performance;
changing market, economic and political conditions, including the impact of tariffs and other trade restrictions or efforts to withdraw from or materially modify international trade agreements;
factors beyond our control such as natural disasters, climate change, acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic;
the financial stability of our customers and suppliers;
consolidation activity among our customers, suppliers and competitors;
the timing of revenue recognition on sales, particularly relating to large orders;
installation service availability and readiness of customer sites;
availability of components and manufacturing capacity;
adverse impact of foreign exchange; and
seasonal effects in our business.
As a result of these factors and other conditions affecting our business and operating results, we believe that quarterly comparisons of our operating results are not necessarily a good indication of possible future performance. Quarterly fluctuations from the above factors may cause our revenue, gross margin and results of operations to underperform in relation to our guidance, long-term financial targets or the expectations of financial analysts or investors, which may cause volatility or decreases in our stock price.
Challenges relating to current supply chain constraints, including semiconductor components, could adversely impact our growth, gross margins and financial results.

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Due to increased demand across a range of industries, the global supply chain for certain raw materials and components, including the semiconductor components used in most of our products, has experienced significant strain in recent periods. The COVID-19 pandemic has also contributed to and exacerbated this strain. This constrained supply environment has adversely affected, and could further affect, availability, lead times and cost of components. These conditions have impacted lead times for our products, and could impact our ability to meet customer demand where we cannot timely secure supply of these components. In an effort to mitigate these risks, in some cases, we have incurred higher costs to secure available inventory, or have extended or placed non-cancellable purchase commitments with semiconductor suppliers, which introduces inventory risk if our forecasts and assumptions prove inaccurate. We have also multi-sourced and pre-ordered components and finished goods inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced. Despite our attempts to mitigate the impact on our business, these constrained supply conditions are expected to adversely impact our costs of goods sold, including our ability to continue to reduce the cost to produce our products in a manner consistent with prior periods. In addition, some suppliers have indicated that as a result of current shortages they intend to cease manufacture of certain components used in our products. Limits on manufacturing availability or capacity or delays in production or delivery of components or raw materials due to COVID-related restrictions could further delay or inhibit our ability to obtain supply of components and produce finished goods. There can be no assurance that the impacts of the pandemic on the supply chain will not continue, or worsen, in the future. These supply chain constraints and their related challenges could result in shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our growth, gross margin, and financial results.

A small number of customers account for a significant portion of our revenue. The loss of these customers or a significant reduction in their spending could have a material adverse effect on our business and results of operations.

A significant portion of our revenue is concentrated among a small number of customers. For example, our ten largest customers contributed 55.5% of our revenue for fiscal 2021 and 54.5% of our fiscal 2020 revenue. Historically, our largest customers by revenue principally consisted of large communications service providers. For example, AT&T accounted for approximately 12.4% of our revenue for fiscal 2021 and 10.6% of our revenue for fiscal 2020. As a result of efforts in recent years to diversify our business, the customer segments and geographies that comprise our customer base and top customers by revenue have changed. During fiscal 2021, four Web-scale providers were among our top ten customers. Web-scale customers have been important contributors to our revenue through both our direct sales to them, including for data center interconnection, and their indirect impact on purchases by other network operators. Consequently, our financial results and our ability to grow our business are closely correlated with the spending of a relatively small number of customers. Our business and results of operations could be materially adversely impacted by the loss of a large customer within or outside of these customer segments as well as by reductions in spending or capital expenditure budgets, changes in network deployment plans or changes in consumption models for acquiring networking solutions by our largest customers.
There have been significant horizontal and vertical consolidation activities by communications service providers and cable operators, with several such operators acquiring media and content companies. Customer consolidation can increase customer purchasing power and has in the past resulted in delays or reductions in network spending due to changes in strategy or leadership, the timing of regulatory approvals and debt burdens associated with such transactions.
Because of our concentration of revenue with communications service providers and Web-scale providers, our business and results of operations can be significantly affected by market, industry or competitive dynamics adversely affecting these customer segments. For example, communications service providers continue to face a rapidly shifting competitive landscape as cloud service operators, “over-the-top” (OTT) providers, and other content providers challenge their traditional business models and network infrastructures. These dynamics have in the past had an adverse effect on network spending levels by certain of our largest service provider customers. Several of these, including AT&T, have announced various initiatives that seek to modify how they purchase networking infrastructure or reduce capital expenditures on network infrastructure in future periods that may adversely affect our results of operations. Our business and results of operations could be materially adversely affected by these factors and other market, industry or competitive dynamics adversely impacting our customers.
We face intense competition that could hurt our sales and results of operations, and we expect the competitive landscape in which we operate to continue to broaden to include additional solutions providers.
We face an intense competitive market for sales of communications networking equipment, software and services. Competition is intense on a global basis, as we and our competitors aggressively seek to capture market share and displace incumbent equipment vendors. Our industry has historically been dominated by a small number of very large vendors, some of which have substantially greater financial, marketing and research and development resources, broader product offerings and more established relationships with service providers and other customer segments than we do. In addition, to drive scale and market share gains and meet the intense investment capacity required to keep pace with technology innovation, acquisition activity among vendors of networking solutions has increased. Consolidation in our industry may result in competitors with greater resources, pricing flexibility, or other synergies, which may provide them with a competitive advantage.
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Certain of our customers are adopting procurement strategies that seek to purchase a broader set of networking solutions from a single or small number of vendors. Because of their scale, resources, and a more diverse set of solution offerings, certain of our larger competitors may be perceived to be a better fit for the procurement or network operating and management strategies of these customers. We also compete with a number of smaller companies that provide significant competition for specific products, applications, customer segments or geographic markets. Due to the narrower focus of their efforts, these competitors may achieve commercial availability of their products more quickly or may be more attractive to customers in a particular product niche.
Generally, competition in our markets is based on any one or a combination of the following factors:
the ability to meet customer business needs and drive successful outcomes;
functionality, speed, capacity, scalability, performance, quality and reliability of solutions;
price for performance, cost per bit and total cost of ownership of solutions;
incumbency and strength of existing business relationships;
ability to offer comprehensive networking solutions, consisting of hardware, software and services;
time-to-market in delivering products and features;
technology roadmap and forward innovation capacity and ability to deliver on network innovation;
company stability and financial health;
flexibility and openness of platforms, including ease of integration, interoperability and integrated management;
ability to offer solutions that accommodate a range of emerging customer consumption models for network solutions;
operating costs, space requirements and power consumption of network solutions;
software and network automation and analytics capabilities;
manufacturing and lead-time capability; and
services and support capabilities.

Part of our strategy is to leverage our technology leadership and to aggressively capture additional market share and displace competitors, particularly with communications service providers internationally. In an effort to maintain our incumbency or to secure new customer opportunities, we have in the past, and may in the future, agree to aggressive pricing, commercial concessions and other unfavorable terms that result in low or negative gross margins on a particular order or group of orders. Competition can also result in onerous commercial and legal terms and conditions that place a disproportionate amount of risk on us.
We expect the competition in our industry to continue to broaden and to intensify, as we invest in complementary technologies or adjacent market opportunities, and as network operators pursue a diverse range of network strategies and consumption models. As these changes occur, we expect that our business will compete more directly with additional networking solution suppliers, including IP router vendors, data center switch providers and other suppliers or integrators of networking technology. In addition, as we seek increased customer adoption of our Blue Planet Automation Software and Services, and as network operator demands for programmability, automation and analytics increase, we expect to compete more directly with software vendors and IT vendors or integrators of these solutions. We may also face competition from system and component vendors, including those in our supply chain, that develop networking products based on off-the-shelf or commoditized hardware technology, referred to as “white box” hardware. An increase in competitive intensity, the adoption of new consumption models, our entry into new markets or the entry of new competitors into our markets may adversely impact our business and results of operations.
The COVID-19 pandemic has impacted our business and results of operation and could have a material adverse effect on our business, results of operations and financial condition in the future.
The COVID-19 pandemic and related countermeasures have caused economic and financial disruptions in most of the regions in which we sell our products and services and conduct our business operations. Unprecedented actions have been taken by governments and other institutions globally to try to contain the COVID-19 pandemic, such as travel bans and restrictions, business closures, social distancing measures, quarantines and shelter-in-place orders. In fiscal 2021, the COVID-19 pandemic continued to challenge our business operations and adversely impact our financial results, including due to restrictions on travel and gatherings, significant supply chain disruptions, disruption in our ability to provide services to customers, and a dynamic demand environment for our products and services. Different jurisdictions have imposed or retained varying restrictions and achieved varying success at managing the impact of the pandemic. In addition, many jurisdictions have experienced resurgences in COVID-19 cases and have halted or reversed the loosening of restrictions in response. For example, an outbreak of COVID-19 in India beginning in March 2021 led to increase employee absenteeism and resulting government restrictions limited in certain cases the movement of our employees. The magnitude and duration of disruption from the COVID-19 pandemic, and its impact on global business activity and our business and operations, remain uncertain. If the COVID-19 pandemic or its adverse effects become more severe or prevalent or are prolonged in the locations where we, our customers, suppliers or
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manufacturers conduct business, or we experience more pronounced disruptions in our business or operations, or in economic activity and demand for our products and services generally, our business and results of operations in future periods could be materially adversely affected.

Employees

As a result of the COVID-19 pandemic, we have kept most of our offices globally temporarily closed, implemented travel restrictions and withdrawn from certain industry events. Restrictions on travel and gatherings due to COVID-19 have impacted, and are likely to continue to impact, our interaction with customers, the timing of certain field and lab trials, our ability to carry out certain sales and marketing activities, as well as our ability to secure new customers, to qualify and sell new products, and to grow sales with customers where we do not have longer-standing supply relationships, including within our Blue Planet Automation Software and Services segment and our Routing and Switching product line. In addition, government requirements intended to mitigate the impact of the pandemic, including mandates that require employees to be vaccinated or be tested regularly, may lead to increased attrition, challenges in meeting labor needs, inefficiencies related to employee turnover, and costs associated with implementation and ongoing compliance.

Services and Customer Fulfillment

We have experienced some disruption in our ability to provide installation, professional and fulfillment services to customers during the COVID-19 pandemic. These disruptions have resulted from site access limitations, limited customer availability, project delays or re-prioritization by customers, travel bans and restrictions on movement or gatherings. We have also experienced transportation disruptions, such as reduced availability of air transport, port closures, and increased border controls or closures. These conditions have also made it more challenging to execute and adversely impacted the timing of customer plans to operationalize newer projects and recent customer design wins, primarily in international markets. Our customers have also experienced, and may continue to experience, disruptions in their operations, which can result in delayed, reduced, or canceled orders, and increased collection risks, and which may adversely affect our results of operations.

Demand for Products and Services

The demand environment for our products and services remains dynamic and continues to be impacted by the effects of the COVID-19 pandemic. For example, we experienced a constrained spending environment during the second half of fiscal 2020 and the first quarter of fiscal 2021 that adversely impacted our revenue during that period. During the remainder of fiscal 2021, we experienced significantly stronger order volumes for our products and services, particularly among a concentrated set of larger customers with which we have existing positions as a supplier. We believe some portion of these orders reflects certain short-term customer purchasing behaviors, including network operators addressing capacity and network requirements following a period of constrained spending in previous quarters, and possible acceleration of future orders due to the implementation of security of supply strategies amidst global supply constraints for semiconductor components. As our customers and their customers continue to evaluate the ways in which networks and working environments will change even after the pandemic subsides, there may be long-lasting changes in customer behaviors and needs, including the end users of our customers, which may impact the demand for our products and services in the long-term.

See also the risk factor above entitled “Challenges relating to current supply chain constraints, including semiconductor components, could adversely impact our growth, gross margins and financial results.

Investment of research and development resources in communications networking technologies for which there is not an adequate market demand, or failure to invest sufficiently or timely in technologies for which there is market demand, would adversely affect our revenue and profitability.

The market for communications networking hardware and software solutions is characterized by rapidly evolving technologies, changes in market demand and increasing adoption of software-based networking solutions. We continually invest in research and development to sustain or enhance our existing hardware and software solutions and to develop or acquire new technologies including new software platforms. There is often a lengthy period between commencing these development initiatives and bringing new or improved solutions to market. Accordingly, there is no guarantee that our new products or enhancements to other solutions will achieve market acceptance or that the timing of market adoption will be as predicted. As a result of the COVID-19 pandemic, technology preferences, customer demand and the markets for our solutions may move in directions that we had not anticipated. As a general matter, there is a significant possibility that some of our development decisions, including significant expenditures on acquisitions, research and development, or investments in technologies, will not meet our expectations, and that our investment in some projects will be unprofitable. There is also a possibility that we may miss a market opportunity because we failed to invest or invested too late in a technology, product or enhancement sought by our customers or the markets into which we sell. Changes in market demand or investment priorities may also cause us to discontinue existing or planned development for new products or features, which can have a disruptive effect on our
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relationships with customers. In addition, failure to develop, on a cost-effective basis, innovative new or enhanced solutions that are attractive to customers and profitable to us could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We have no guaranteed purchases and regularly have to re-win business for existing customers.

Generally, our customer contracts do not require customers to purchase any minimum or guaranteed volumes, and we conduct sales through framework contracts under which customers place purchase orders for which they often have the right to modify or cancel. We must regularly compete for and win business with existing customers across all of our customer segments. In addition, Web-scale providers tend to operate on shorter procurement cycles than some of our traditional customers, which can require us to compete to re-win business with these customers more frequently than required with other customers segments. As such, there is no assurance that our incumbency will be maintained at any given customer or that our revenue levels from a customer in a particular period can be achieved in future periods. Customer spending levels can be unpredictable, and our sales to any customer could significantly decrease or cease at any time.

Network equipment sales often involve lengthy sales cycles and protracted contract negotiations that may require us to agree to commercial terms or conditions that negatively affect pricing, risk allocation, payment and the timing of revenue recognition.

Our sales efforts, particularly with communications service providers, Web-scale providers and other large customers, often involve lengthy sales cycles. These selling efforts often involve a significant commitment of time and resources that may include extensive product testing, laboratory or network certification, network or region-specific product certification and homologation requirements for deployment in networks. Even after a customer awards its business to us or decides to purchase our solutions, the length of time before deployment can vary depending on the customer’s schedule, site readiness, the size of the network deployment, the degree of custom configuration required and other factors. Additionally, these sales also often involve protracted and sometimes difficult contract negotiations in which we may deem it necessary to agree to unfavorable contractual or commercial terms that adversely affect pricing, expose us to penalties for delays or non-performance and require us to assume a disproportionate amount of risk. To maintain incumbency with key customers, we may be required to offer discounted pricing, make commercial concessions or offer less favorable terms as compared to our historical business arrangements with these customers. We may also be requested to provide deferred payment terms, vendor or third-party financing or other alternative purchase structures that extend the timing of payment. Alternatively, customers may insist on terms and conditions that we deem too onerous or not in our best interest, and we may be unable to reach a commercial agreement. As a result, we may incur substantial expense and devote time and resources to potential sales opportunities that never materialize or result in lower than anticipated sales and gross margin.
If we are unable to adapt our business to the consumption models for networking solutions adopted by our customers and to offer attractive solutions across these consumption models, our business, competitive position and results of operations could be adversely affected.
Growing bandwidth demands and network operator efforts to reduce costs are resulting in a diverse range of approaches to the design and procurement of network infrastructure. We refer to these different approaches as “consumption models.” These consumption models can include: the traditional systems procurement of fully integrated solutions including acquiring hardware, software and services from the same vendor; the procurement of a fully integrated hardware solution from one vendor with the separate use of a network operator’s own SDN-based controller; the procurement of an integrated photonic line system with open interfaces from one vendor and the separate or “disaggregated” procurement of modem technology from a different vendor; or the development and use of published reference designs and open source specifications for the procurement of “white box” hardware to be used with open source software. In parallel, network operators are also exploring procurement alternatives for software solutions, ranging from integrated and proprietary software platforms to fully open source software.
We believe that network operators will continue to consider a variety of different consumption models. Many of these approaches are in their very early stages of development and evaluation, and the types of models and their levels of adoption will depend in significant part on the nature of the circumstances and strategies of particular network operators. Among our customers, AT&T, certain Web-scale providers and others are pursuing network strategies that emphasize enhanced software programmability, management and control of networks, and deployment of “white box” hardware. A number of network operators are pursuing the deployment of smaller form factor, pluggable modem technology, particularly within switching and routing solutions, as an alternative to integrated optical networking platforms. Other network operators, including certain of our Web-scale customers, are playing a leading role in the transition to software-defined networking or the standardization of communications network solutions. We believe that the potential for different approaches to the procurement of networking infrastructure will require network operators and vendors to evolve and broaden their existing solutions and commercial models
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over time. Adoption of a range of consumption models may also alter and broaden our competitive landscape to include other technology vendors, including routing vendors, component vendors and IT software vendors. If we are unable to adapt our business to these new consumption models and offer attractive solutions and commercial models that accommodate the range of consumption models ultimately adopted by our customers or within our markets, our business, competitive position and results of operations could be adversely affected.
Our go-to-market activities and the distribution of our WaveLogic coherent modem technology within the market for high-performance transceivers/modems could expose us to increased or new forms of competition, or adversely affect our existing systems business and results of operations.

We recently entered the market for high-performance transceivers/modems to monetize our coherent optical technology, expand our addressable market and address a range of customer consumption models for networking solutions. Making our critical technology available in this manner could adversely impact the sale of products in our existing systems business. For example, our customers may choose to adopt disaggregated consumption models or third-party solutions that embed Ciena-designed optical modules instead of purchasing systems-based solutions from us. Accordingly, we may encounter situations where we are competing for opportunities in the market directly against a system from one of our competitors that incorporates Ciena-designed modules or other component technologies. Making this key technology available and enabling third-party sales of Ciena-designed modules may adversely affect our competitive position and increase the risk that third parties misappropriate or attempt to use our technology or related intellectual property without our authorization. These and other risks or unanticipated liabilities or costs associated with the sales of our WaveLogic coherent technology could harm our reputation and adversely affect our business and our results of operations. Our go-to-market activities and the distribution of our WaveLogic coherent technology within the market for high-performance transceivers/modems could expose us to increased or new forms of competition, or adversely affect our systems business and results of operation.
If we fail to predict demand accurately, we may be required to write off significant amounts of inventory as a result of our inventory purchase practices and could incur additional costs or experience manufacturing delays.
Accurately predicting demand and purchasing inventory and components within the current supply constrained and dynamic demand environment is challenging and could adversely impact our financial results and customer experience. To avoid delays and meet customer delivery demands, we place orders with our contract manufacturers and component suppliers based on forecasts of customer demand. In many cases these suppliers may require longer lead times for fulfillment than we have with our customers. Thus, our practice of buying inventory based on forecasted demand exposes us to the risk that our customers ultimately may not order the products we have forecast or will purchase fewer products than forecast. As a result, we may purchase inventory in anticipation of sales that ultimately do not occur. We regularly incur, on a quarterly basis, expense provisions against excess or obsolete inventory and may have difficulty forecasting inventory and customer spending. Moreover, our customer purchase agreements generally do not include any minimum purchase commitment and customers often have the right to modify, reduce or cancel purchase quantities. Our products are highly configurable, and certain new products have overlapping feature sets or application with existing products. Accordingly, it is increasingly possible that customers may forgo purchases of certain products we have inventoried in favor of a similar or newer product. We may also be exposed to inventory write-offs as a result of certain supply chain initiatives, including consolidation and transfer of key manufacturing activities. If we are required to write off or write down a significant amount of inventory, our results of operations for the applicable period would be materially adversely affected. Conversely, if we underestimate our demand, our contract manufacturers and component suppliers may have inadequate time, materials, or components required to manufacture our products. This could increase costs or delay or interrupt manufacturing of our products, resulting in delays in shipments and deferral or loss of revenues and could adversely impact customer satisfaction.
If the market for network software does not evolve in the way we anticipate or if customers do not adopt our Blue Planet Automation Software and Services, we may not be able to monetize these software assets and realize a key part of our business strategy.
A key part of our business strategy is to increase customer adoption of our Blue Planet Automation Software Platform. If the markets relating to software solutions for network automation, including service orchestration, route optimization, analytics and assurance, and SDN or NFV, do not develop as we anticipate, or if we are unable to commercialize, increase market awareness and gain adoption of our Blue Planet Automation Software and Services within those markets, revenue from our Blue Planet Automation Software and Services may not grow. We have a limited history in commercializing and selling these software solutions and have only recently acquired certain elements of our Blue Planet portfolio. Moreover, the market and competitive landscape for these solutions is dynamic, and it is difficult to predict important trends, including the potential growth, if any, of this market. If the market for these software solutions does not evolve in the way we anticipate or if customers do not adopt our Blue Planet Automation Software and Services, a key part of our strategy for growth would be adversely affected and our financial results may suffer.
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Our exposure to the credit risks of our customers and resellers may make it difficult to collect receivables and could adversely affect our revenue and operating results.
In the course of our sales to customers and resale channel partners, we may have difficulty collecting receivables, and our business and results of operations could be exposed to risks associated with uncollectible accounts. Lack of liquidity in the capital markets, macroeconomic weakness and market volatility may increase our exposure to these credit risks. Our attempts to monitor customer payment capability and to take appropriate measures to protect ourselves may not be sufficient, and it is possible that we may have to write down or write off accounts receivable. Such write-downs or write-offs could negatively affect our operating results for the period in which they occur, and, if large, could have a material adverse effect on our revenue and operating results.
We may be required to write down the value of certain significant assets, which would adversely affect our operating results.
We have a number of significant assets on our balance sheet as of October 30, 2021 and the value of these assets can be adversely impacted by factors related to our business and operating performance, as well as factors outside of our control. As of October 30, 2021, our balance sheet includes a $800.2 million net deferred tax asset. The value of our net deferred tax assets can be significantly impacted by changes in tax policy or our tax planning strategy. For example, the Tax Cuts and Jobs Act (the “Tax Act”) required us to write down our net deferred tax assets by approximately $438.2 million in fiscal 2018. If any additional write-downs are required, our operating results may be materially adversely affected.

As of October 30, 2021, our balance sheet also includes $311.6 million of goodwill. We test each reporting unit for impairment of goodwill on an annual basis and, between annual tests, if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. As of October 30, 2021, our balance sheet also includes $450.3 million in long-lived assets, which includes $65.3 million of intangible assets. Valuation of our long-lived assets requires us to make assumptions about future sales prices and sales volumes for our products. These assumptions are used to forecast future, undiscounted cash flows on which our estimates are based. The value of our net deferred tax asset above may also be subject to change in the future, based on our actual or projected generation of future taxable income. If market conditions or our forecasts for our business or any particular operating segment change, we may be required to reassess the value of these assets. We could be required to record an impairment charge against our goodwill and long-lived assets or a valuation allowance against our deferred tax assets. Any write-down of the value of these significant assets would have the effect of decreasing our earnings or increasing our losses in such period. If we are required to take a substantial write-down or charge, our operating results would be materially adversely affected in such period.
Product performance problems and undetected errors affecting the performance, interoperability, reliability or security of our products could damage our business reputation and negatively affect our results of operations.
The development and production of sophisticated hardware and software for communications network equipment is highly complex. Some of our products can be fully tested only when deployed in communications networks or when carrying traffic with other equipment, and software products may contain bugs that can interfere with expected performance. As a result, undetected defects or errors, and product quality, interoperability, reliability and performance problems are often more acute for initial deployments of new products and product enhancements. We have recently launched, or are in the process of launching, a number of new hardware and software offerings, including evolutions of our WaveLogic coherent optical modem technology, new Routing and Switching platforms and solutions targeting access and metro networks, and 5G and data center interconnect applications. Unanticipated product performance problems can relate to the design, manufacturing, installation, operation and interoperability of our products. Undetected errors can also arise as a result of defects in components, software or manufacturing, installation or maintenance services supplied by third parties, and technology acquired from or licensed by third parties. From time to time we have had to replace certain components, provide software remedies or other remediation in response to defects or bugs, and we may have to do so again in the future. Remediation of such events could materially adversely impact our business and results of operations. In addition, we may encounter unanticipated security vulnerabilities relating to our products or the activities of our supply chain. Our products are used in customer networks transmitting a range of sensitive information, and any actual or perceived exposure of our solutions to malicious software or cyber-attacks could adversely affect our business and results of operations. Product performance, reliability, security and quality problems may result in some or all of the following effects:
damage to our reputation, declining sales and order cancellations;
increased costs to remediate defects or replace products;
payment of liquidated damages, contractual or similar penalties, or other claims for performance failures or delays;
increased warranty expense or estimates resulting from higher failure rates, additional field service obligations or other rework costs related to defects;
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higher charges for increased inventory obsolescence;
costs, liabilities and claims that may not be covered by insurance coverage or recoverable from third parties; and
delays in recognizing revenue or collecting accounts receivable.
These and other consequences relating to undetected errors affecting the quality, reliability and security of our products could negatively affect our business and results of operations.
Strategic acquisitions and investments could disrupt our operations and may expose us to increased costs and unexpected liabilities.
From time to time, we acquire or make investments in other technology companies, or enter into other strategic relationships, to expand the markets we address, diversify our customer base or acquire, or accelerate the development of, technology or products. To do so, we may use cash, issue equity that could dilute our current stockholders, or incur debt or assume indebtedness. Strategic transactions can involve numerous additional risks, including:
failure to achieve the anticipated transaction benefits or the projected financial results and operational synergies;
greater than expected acquisition and integration costs;
disruption due to the integration and rationalization of operations, products, technologies and personnel;
diversion of management attention;
difficulty completing projects of the acquired company and costs related to in-process projects;
difficulty managing customer transitions or entering into new markets;
the loss of key employees;
disruption or termination of business relationships with customers, suppliers, vendors, landlords, licensors and other business partners;
ineffective internal controls over financial reporting;
dependence on unfamiliar suppliers or manufacturers;
assumption of or exposure to unanticipated liabilities, including intellectual property infringement or other legal claims; and
adverse tax or accounting impact.
As a result of these and other risks, our acquisitions, investments or strategic transactions may not realize the intended benefits and may ultimately have a negative impact on our business, results of operation and financial condition.
Risks Relating to the Macroeconomic Environment and our Global Presence
Our business and operating results could be adversely affected by unfavorable changes in macroeconomic and market conditions and reductions in the level of spending by customers in response to these conditions.
Our business and operating results depend significantly on general market and economic conditions. Market volatility and weakness in the regions in which we operate have previously resulted in sustained periods of decreased demand for our products and services that adversely affected our operating results. The current global macroeconomic environment is challenging, and continues to be significantly and adversely impacted by the COVID-19 pandemic, global supply chain constraints and a dynamic demand environment. Macroeconomic and market conditions could also be adversely affected by a variety of political, economic or other factors in the United States and international markets that could in turn adversely affect spending levels of our customers and their end users, and could create volatility or deteriorating conditions in the markets in which we operate. Due to our concentration of revenue in the United States, we would expect to incur a more significant impact from any adverse change in the capital spending environment or macroeconomic or market weakness in the United States. Macroeconomic uncertainty or weakness could result in:
reductions in customer spending and delay, deferral or cancellation of network infrastructure initiatives;
increased competition for fewer network projects and sales opportunities;
increased pricing pressure that may adversely affect revenue, gross margin and profitability;
decreased ability to forecast operating results and make decisions about budgeting, planning and future investments;
increased overhead and production costs as a percentage of revenue;
tightening of credit markets needed to fund capital expenditures by us or our customers;
customer financial difficulty, including longer collection cycles and difficulties collecting accounts receivable or write-offs of receivables;
business and financial difficulties faced by our suppliers or other partners, including impacts to material costs, sales, liquidity levels, ability to continue investing in their businesses, ability to import or export goods, ability to meet development commitments and manufacturing capability; and
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increased risk of charges relating to excess and obsolete inventories and the write-off of other intangible assets.
Each of our customers has a unique set of circumstances, and it is unclear how macroeconomic and market conditions, including those created or exacerbated by COVID-19, may continue to impact their purchasing volumes or behaviors. Reductions in customer spending in response to unfavorable or uncertain macroeconomic and market conditions, globally or in a particular region where we operate, would adversely affect our business, results of operations and financial condition.

The international scale of our sales and operations exposes us to additional risk and expense that could adversely affect our results of operations.

We market, sell and service our products globally, maintain personnel in numerous countries, and rely on a global supply chain for sourcing important components and manufacturing our products. Our international sales and operations are subject to inherent risks, including:
adverse social, political and economic conditions;
effects of adverse changes in currency exchange rates;
greater difficulty in collecting accounts receivable and longer collection periods;
difficulty and cost of staffing and managing foreign operations;
higher incidence of corruption or unethical business practices;
less protection for intellectual property rights in some countries;
tax and customs changes that adversely impact our global sourcing strategy, manufacturing practices, transfer-pricing, or competitiveness of our products for global sales;
compliance with certain testing, homologation or customization of products to conform to local standards;
significant changes to free trade agreements, trade protection measures, tariffs, export compliance, domestic preference procurement requirements, qualification to transact business and additional regulatory requirements; and
natural disasters (including as a result of climate change), acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic.
We utilize a sourcing strategy that emphasizes global procurement of materials that has direct or indirect dependencies upon a number of vendors with operations in the Asia-Pacific region. We also rely upon third-party contract manufacturers, including those with facilities in Canada, Mexico, Thailand and the United States, to manufacture, support and ship our products. Physical, regulatory, technological, market, reputational, and legal risks related to climate change in these regions and globally are increasing in impact and diversity and the magnitude of any short term or long term adverse impact on our business or results of operations remains unknown. The physical impacts of climate change, including as a result of certain types of natural disasters occurring more frequently or with more intensity or changing weather patterns, could disrupt our supply chain, result in damage to or closures of our facilities, and could otherwise have an adverse impact on our business, operating results, and financial condition. See also the risk factor below entitled “Government regulations related to the environment, climate change and social initiatives could adversely affect our business and operating results.”

Our international operations are subject to complex foreign and U.S. laws and regulations, including anti-bribery and corruption laws, antitrust or competition laws, data privacy laws, such as the GDPR, and environmental regulations, among others. In particular, recent years have seen a substantial increase in anti-bribery law enforcement activity by U.S. regulators, and we currently operate and seek to operate in many parts of the world that are recognized as having greater potential for corruption. Violations of any of these laws and regulations could result in fines and penalties, criminal sanctions against us or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in certain geographies, and significant harm to our business reputation. Our policies and procedures to promote compliance with these laws and regulations and to mitigate these risks may not protect us from all acts committed by our employees or third-party vendors, including contractors, agents and services partners. Additionally, the costs of complying with these laws (including the costs of investigations, auditing and monitoring) could adversely affect our current or future business.

The success of our international sales and operations will depend, in large part, on our ability to anticipate and manage these risks effectively. Our failure to manage any of these risks could harm our international operations, reduce our international sales, and could give rise to liabilities, costs or other business difficulties that could adversely affect our operations and financial results.
Efforts to increase our sales and capture market share in targeted international markets may be unsuccessful.

Part of our business and growth strategy is to expand our geographic reach and increase market share in international markets through a combination of direct and indirect sales resources. We are also aggressively pursuing opportunities with service provider customers in additional geographies, including EMEA and APAC. This diversification of our markets and customer base has been a significant component of the growth of our business in recent years. Our efforts to continue to increase
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our sales and capture market share in international markets may ultimately be unsuccessful or may adversely impact our financial results, including our gross margin. Our failure to continue to increase our sales and market share in international markets could limit our growth and could harm our results of operations.
We may be adversely affected by fluctuations in currency exchange rates.

As a company with global operations, we face exposure to movements in foreign currency exchange rates. Due to our global presence, a significant percentage of our revenue, operating expense and assets and liabilities are non-U.S. Dollar denominated and therefore subject to foreign currency fluctuation. We face exposure to currency exchange rates as a result of the growth in our non-U.S. Dollar denominated operating expense in Canada, Europe, Asia and Latin America. An increase in the value of the U.S. Dollar could increase the real cost to our customers of our products in those markets outside the United States where we sell in U.S. Dollars, and a weakened U.S. Dollar could increase the cost of local operating expenses and procurement of materials or service that we purchase in foreign currencies. From time to time, we hedge against currency exposure associated with anticipated foreign currency cash flows or assets and liabilities denominated in foreign currency. Such attempts to offset the impact of currency fluctuations are costly, and we cannot hedge against all foreign exchange rate volatility. Losses associated with these hedging instruments and the adverse effect of foreign currency exchange rate fluctuation may negatively affect our results of operations.
Risks Related to Our Operations and Reliance on Third Parties
We may experience delays in the development and production of our products that may negatively affect our competitive position and business.
Our hardware and software networking solutions, including our coherent optical chipset, our WaveLogic modem technology and the components thereof, are based on complex technology, and we can experience unanticipated delays in developing, manufacturing and introducing these solutions to market. Delays in product development efforts by us or our supply chain may affect our reputation with customers, affect our ability to capture market opportunities and impact the timing and level of demand for our products. Among other things, we are currently extending our Routing and Switching portfolio with additional IP features, and introducing new solutions within our Platform Software and Services and Blue Planet Automation Software and Services segments. Each step in the development cycle of our products presents serious risks of failure, rework or delay, any one of which could adversely affect the cost-effectiveness and timely development of our products. We may encounter delays relating to engineering development activities and software, design, sourcing and manufacture of critical components, and the development of prototypes. The development of new technologies may increase the complexity of supply chain management or require the acquisition, licensing or interworking with the technology of third parties. In addition, intellectual property disputes, failure of critical design elements and other execution risks may delay or even prevent the release of these products. If we do not successfully develop or produce products in a timely manner, our competitive position may suffer, and our business, financial condition and results of operations could be harmed.
We rely on third-party contract manufacturers, and our business and results of operations may be adversely affected by risks associated with their businesses, financial condition and the geographies in which they operate.
We rely on third-party contract manufacturers, including those with facilities in Canada, Mexico, Thailand, and the United States, to perform a substantial portion of our supply chain activities, including component sourcing, manufacturing, product testing and quality, and fulfillment and logistics relating to the distribution and support of our products. There are a number of risks associated with our dependence on contract manufacturers, including:

reduced control over delivery schedules and planning;
reliance on the quality assurance procedures of third parties;
potential uncertainty regarding manufacturing yields and costs;
availability of manufacturing capability and capacity, particularly during periods of high demand;
risks and uncertainties associated with the locations or countries where our products are manufactured, including potential manufacturing disruptions caused by social, geopolitical, environmental or health factors, including pandemics or widespread health epidemics such as the COVID-19 pandemic;
changes in law or policy governing tax, trade, manufacturing, development and investment in the countries where we currently manufacture our products, including the World Trade Organization Information Technology Agreement or other free trade agreements;
inventory liability for excess and obsolete supply;
limited warranties provided to us; and
potential misappropriation of our intellectual property.
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These and other risks could impair our ability to fulfill orders, harm our sales and impact our reputation with customers. If our contract manufacturers are unable or unwilling to continue manufacturing our products or components of our products, or if we experience a disruption of manufacturing or our contract manufacturers discontinue operations, we may be required to identify and qualify alternative manufacturers, which could cause us to be delayed in or unable to meet our supply requirements to our customers and result in the breach of our customer agreements. The process of qualifying a new contract manufacturer and commencing volume production is expensive and time-consuming, and if we are required to change or qualify a new contract manufacturer, we would likely experience significant business disruption and could lose revenue and damage our existing customer relationships. See the risk factor above entitled “The COVID-19 pandemic has impacted our business and results of operation and could have a material adverse effect on our business, results of operations and financial condition in the future” for additional factors related to COVID-19 and our third-party contract manufacturers that could adversely affect our business and financial results.
Our reliance on third-party component suppliers, including sole and limited source suppliers, exposes our business to additional risk, including risk relating to our suppliers’ businesses and financial position and risks arising as a result of geopolitical events, and could limit our sales, increase our costs and harm our customer relationships.
We maintain a global sourcing strategy and depend on a diverse set of third-party suppliers in international markets that comprise our supply chain. We rely on these third parties for activities relating to product design, development and support, and in the sourcing of products, components, subcomponents and related raw materials. Our products include optical and electronic components for which reliable, high-volume supply is often available only from sole or limited sources. We do not have any guarantees of supply from our third-party suppliers, and in certain cases we have limited contractual arrangements or are relying on standard purchase orders. As a result, there is no assurance that we will be able to secure the components or subsystems that we require, in sufficient quantity and quality, and on reasonable terms.

The loss of a source of supply, or lack of sufficient availability of key components, could require that we locate an alternate source or redesign our products, either of which could result in business interruption and increased costs. Increases in market demand or scarcity of raw materials or components have resulted, and may in the future result, in shortages in availability of important components for our solutions, supply allocation challenges, deployment delays and increased cost, lead times and delivery cycle timelines. There are a number of significant technology trends or developments underway or emerging – including the Internet of Things, autonomous vehicles, and advances in mobile communications such as the emergence of 5G – that have previously resulted in, and we believe will continue to result in, increased market demand for key raw materials or components upon which we rely.

A number of our key technology vendors rely upon sales to customers, including our competitors, in China for a material portion of their revenue. Recently, there have been a number of significant geopolitical events, including trade tensions and regulatory actions, involving the governments of the United States and China. In May 2019, the U.S. Department of Commerce amended the Export Administration Regulations by adding Huawei Technologies Co., Ltd. and certain affiliates to the “Entity List” for actions contrary to the national security and foreign policy interests of the United States, imposing significant new restrictions on export, reexport and transfer of U.S. regulated technologies and products to Huawei. In August 2020, the U.S. Department of Commerce added additional Huawei affiliates to the Entity List, confirmed the expiration of a temporary general license applicable to Huawei and amended the foreign direct product rule in a manner that represents a significant expansion of its application to Huawei. Several of our third-party component suppliers, including certain sole and limited source suppliers, sell products to Huawei and, in some cases, Huawei is a significant customer for such suppliers. At this time, there can be no assurance regarding the scope or duration of these restrictions, including the foreign direct product rule, or further actions imposed on Huawei, and any future impact on our suppliers. Any continued restriction on our suppliers’ ability to make sales to Huawei may adversely impact their businesses and financial position. In addition, China is in the midst of executing a five-year plan to improve China’s capabilities in the optoelectronics industry. There can be no assurance that this initiative, or similar efforts in China such as the Made in China 2025 initiatives, will not have an adverse impact on the business of our suppliers or our access to necessary components. These and similar industry, market and regulatory disruptions affecting our suppliers could, in turn, expose our business to loss or lack of supply or discontinuation of components that could result in lost revenue, additional product costs, increased lead times and deployment delays that could harm our business and customer relationships. Our business and results of operations would be negatively affected if we were to experience any significant disruption or difficulties with key suppliers affecting the price, quality, availability or timely delivery of required components.
We rely on third-party resellers and distribution partners to sell our solutions, and on third-party service partners for installation, maintenance and support functions, and our failure to develop and manage these relationships effectively could adversely affect our business, results of operations, and relationships with our customers.

In order to sell into new markets, diversify our customer base and broaden the application for our solutions, and to complement our global field resources, we rely on a number of third-party resellers, distribution partners and sales agents, both
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domestic and international, and we believe that these relationships are an important part of our business. There can be no assurance that we will successfully identify and qualify these resources or that we will realize the expected benefits of these sales relationships.
We also rely on a number of third-party service partners, both domestic and international, to complement our global service and support resources. We rely on these partners for certain installation, maintenance and support functions. In addition, as network operators increasingly seek to rely on vendors to perform additional services relating to the design, construction and operation of their networks, the scope of work performed by our support partners is likely to increase and may include areas where we have less experience providing or managing such services. We must successfully identify, assess, train and certify qualified service partners in order to ensure the proper installation, deployment and maintenance of our products, as well as to ensure the skillful performance of other services associated with expanded solutions offerings, including site assessment and construction-related services.
Certain service partners may provide similar services for other companies, including our competitors. We may not be able to manage our relationships with our service partners effectively, and we cannot be certain that they will be able to deliver services in the manner or time required, that we will be able to maintain the continuity of their services, or that they will adhere to our approach to ethical business practices. We may also be exposed to a number of risks or challenges relating to the performance of our service partners, including:
delays in recognizing revenue;
liability for injuries to persons, damage to property or other claims relating to the actions or omissions of our service partners;
our services revenue and gross margin may be adversely affected; and
our relationships with customers could suffer.
As our service offering expands and customers look to identify vendors capable of managing, integrating and optimizing multi-domain, multi-vendor networks with unified software, our relationships with third-party service partners will become increasingly important.
We must also assess and certify or qualify third-party resellers, distribution partners, sales agents and service partners in order to ensure their understanding of and willingness and ability to adhere to our Code of Business Conduct and Ethics, our Ciena Partner Network Code of Business Conduct and Ethics, the RBA Code of Conduct, and ethical business practices, as applicable. Vetting and certification of these resellers, agents and distribution and service partners can be costly and time-consuming. Certain resellers, agents and distribution and service partners may not have the same operational history, financial resources and scale that we have.
If we do not effectively identify, develop and manage our relationships with third-party resellers, distribution partners, sales agents or service partners, or if they fail to perform services in the manner or time required, our financial results and relationships with customers could be adversely affected. We may also be held responsible or liable for the actions or omissions of these third parties. Actions, omissions or violations of law by our third-party sales partners or agents or service partners could have a material adverse effect on our business, operating results and financial condition.
We may be exposed to unanticipated risks and additional obligations in connection with our resale of complementary products or technology of other companies.
We have entered into agreements with strategic supply partners that permit us to distribute their products or technology. We may rely on these relationships to add complementary products or technologies, to diversify our product portfolio, or to address a particular customer or geographic market. We may enter into additional original equipment manufacturer (OEM), resale or similar strategic arrangements in the future. We may incur unanticipated costs or difficulties relating to our resale of third-party products. Our third-party relationships could expose us to risks associated with the business, financial condition, intellectual property rights and supply chain continuity of such partners, as well as delays in their development, manufacturing or delivery of products or technology. We may also be required by customers to assume warranty, indemnity, service and other commercial obligations, including potential liability to customers, greater than the commitments, if any, made to us by our technology partners. Some of our strategic supply partners are relatively small companies with limited financial resources. If they are unable to satisfy their obligations to us or our customers, we may have to expend our own resources to satisfy these obligations. Exposure to these risks could harm our reputation with key customers and could negatively affect our business and our results of operations.
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Growth of our business is dependent on the proper functioning and scalability of our internal business processes and information systems. Adoption of new systems, modifications or interruptions of services may disrupt our business, processes and internal controls.
We rely on a number of internal business processes and information systems to support key business functions, and the efficient operation of these processes and systems is critical to managing our business. Our business processes and information systems must be sufficiently scalable to support the growth of our business and may require modifications or upgrades that expose us to a number of operational risks. We continually pursue initiatives to transform and optimize our business operations through the reengineering of certain processes, investment in automation, and engagement of strategic partners or resources to assist with certain business functions. These changes require a significant investment of capital and human resources and may be costly and disruptive to our operations, and they could impose substantial demands on management time. These changes may also require changes in our information systems, modification of internal control procedures and significant training of employees or third-party resources. There can be no assurance that our business and operations will not experience disruption in connection with system upgrades or other initiatives. Even if we do not encounter these adverse effects or disruption in our business, the design and implementation of these new systems may be more costly than anticipated.
Our IT systems, and those of third-party IT providers or business partners, may also be vulnerable to damage or disruption caused by circumstances beyond our control, including catastrophic events, power anomalies or outages, natural disasters (including as a result of climate change), cyber-security related incidents, and computer system or network failures. There can be no assurance that our business systems or those of our third-party business partners will not be subject to similar incidents, exposing us to significant cost, reputational harm and disruption or damage to our business.
Restructuring activities could disrupt our business and affect our results of operations.
We have taken steps, including reductions in force, office closures, and internal reorganizations to reduce the cost of our operations, improve efficiencies, or realign our organization and staffing to better match our market opportunities and our technology development initiatives. We may take similar steps in the future as we seek to realize operating synergies, to achieve our target operating model and profitability objectives, or to reflect more closely changes in the strategic direction of our business or the evolution of our site strategy and workplace. These changes could be disruptive to our business, including our research and development efforts, and could result in significant expense, including accounting charges for inventory and technology-related write-offs, workforce reduction costs and charges relating to consolidation of excess facilities. Substantial expense or charges resulting from restructuring activities could adversely affect our results of operations and use of cash in those periods in which we undertake such actions.
If we are unable to attract and retain qualified personnel, or if our existing personnel are harmed by COVID-19, we may be unable to manage our business effectively.
Our future success and ability to maintain a technology leadership position depends upon our ability to recruit and retain the services of executive, engineering, sales and marketing, and support personnel. Competition to attract and retain highly skilled technical, engineering and other personnel with experience in our industry is intense, and our employees have been the subject of targeted hiring by our competitors. Competition is particularly intense in certain jurisdictions where we have research and development centers, including the Silicon Valley area of northern California, and for engineering talent generally. The impact of the COVID-19 pandemic has resulted in higher employee costs, increased attrition and significant shifts in the labor market and employee expectations. We may experience difficulty retaining and motivating existing employees and attracting qualified personnel to fill key positions. In addition, labor shortages and employee mobility may make it more difficult to hire and retain employees. There can be no assurance that the programs, initiatives, rewards and recognition that are part of our annual “people strategy” will be successful in attracting and retaining the talent necessary to execute on our business plans. Because we rely on equity awards as a significant component of compensation, particularly for our executive team, a lack of positive performance in our stock price, reduced grant levels, or changes to our compensation program may adversely affect our ability to attract and retain key employees. In addition, none of our executive officers is bound by an employment agreement for any specific term. We have a number of workforce planning initiatives underway and our failure to manage these programs effectively could result in the loss of key personnel. Similarly, the failure to properly manage the necessary knowledge transfer required from these employee transitions could impact our ability to maintain industry and innovation leadership. The loss of members of our management team or other key personnel, including due to COVID-19 and related vaccine and testing mandates, could be disruptive to our business and, were it necessary, it could be difficult to replace such individuals. If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively, and our operations and financial results could suffer.
In addition, a number of our team members are foreign nationals who rely on visas or work-entry permits in order to legally work in the United States and other countries. Changes in government policy and global events such as pandemics may interfere
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with our ability to hire or retain personnel who require these visas or entry permits. For example, in response to the COVID-19 pandemic, numerous U.S. Embassies suspended or delayed the processing of new visa applications for a period of time during the pandemic due to COVID-19 related concerns impacting embassy operations and staffing. Additional changes in immigration policy, including the implementation of restrictive interpretations by the U.S. Citizenship and Immigration Services of regulatory requirements for H-1B, L-1 and other U.S. work visa categories, may also adversely affect our ability to hire or retain key talent, which could have an impact on our business operations.
Risks Related to Intellectual Property, Litigation, Regulation and Government Policy
Our intellectual property rights may be difficult and costly to enforce.

We generally rely on a combination of patents, copyrights, trademarks and trade secret laws to establish and maintain proprietary rights in our products and technology. Although we have been issued numerous patents, and other patent applications are currently pending, there can be no assurance that any of these patents or other proprietary rights will not be challenged, invalidated or circumvented, or that our rights will provide us with any competitive advantage. In addition, there can be no assurance that patents will be issued for our pending applications or that claims allowed on any patents will be sufficiently broad to protect our technology. Further, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States.
We are subject to the risk that third parties may attempt to access, divert or use our intellectual property without authorization. Protecting against the unauthorized use of our products, technology and other proprietary rights is difficult, time-consuming and expensive, and we cannot be certain that the steps that we are taking will detect, prevent or minimize the risks of such unauthorized use. In addition, our intellectual property strategy must continually evolve to protect our proprietary rights in new solutions, including our software solutions. Litigation may be necessary to enforce or defend our intellectual property rights or to determine the validity or scope of the proprietary rights of others. Such litigation could result in substantial cost and diversion of management time and resources, and there can be no assurance that we will obtain a successful result. Any inability to protect and enforce our intellectual property rights could harm our ability to compete effectively.
We may incur significant costs in response to claims by others that we infringe their intellectual property rights.
From time to time third parties may assert claims or initiate litigation or other proceedings related to patent, copyright, trademark and other intellectual property rights to technologies and related standards that are relevant to our business. We have been subject to several claims related to patent infringement, and we have been requested to indemnify customers pursuant to contractual indemnity obligations relating to infringement claims made by third parties. The rate of infringement assertions by patent assertion entities is increasing, particularly in the United States. Generally, these patent owners neither manufacture nor use the patented invention directly, and they seek to derive value from their ownership solely through royalties from patent licensing programs.
We could be adversely affected by litigation, other proceedings or claims against us, as well as claims against our manufacturers, suppliers or customers, alleging infringement of third-party proprietary rights by our products and technology, or components thereof. Regardless of the merit of these claims, they can be time-consuming, divert the time and attention of our technical and management personnel, and result in costly litigation or otherwise require us to incur substantial costs, including legal fees. These claims, if successful, could require us to:
pay substantial damages or royalties;
comply with an injunction or other court order that could prevent us from offering certain of our products;
seek a license for the use of certain intellectual property, which may not be available on commercially reasonable terms or at all;
develop non-infringing technology, which could require significant effort and expense and ultimately may not be successful; and
indemnify our customers or other third parties pursuant to contractual obligations to hold them harmless or pay expenses or damages on their behalf.
Any of these events could adversely affect our business, results of operations and financial condition. Our exposure to risks associated with the use of intellectual property may increase as a result of acquisitions, as we would have a lower level of visibility into the development process with respect to the acquired technology and the steps taken to safeguard against the risks of infringing the rights of third parties.
Our products incorporate software and other technology under license from third parties, and our business would be adversely affected if this technology were no longer available to us on commercially reasonable terms.
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We integrate third-party software and other technology into our operating system, network management, and intelligent automation software and other products. As a result, we may be required to license certain software or technology from third parties, including competitors. Licenses for software or other technology may not be available or may not continue to be available to us on commercially reasonable terms. Third-party licensors may insist on unreasonable financial or other terms in connection with our use of such technology. Our failure to comply with the terms of any license may result in our inability to continue to use such license, which may result in significant costs, harm our market opportunities and require us to obtain or develop a substitute technology.
Some of our solutions, including our Blue Planet Automation Software, utilize elements of open source or publicly available software. As network operators seek to enhance programmability and automation of networks, we expect that we and other communications networking solutions vendors will increasingly contribute to and use technology or open source software developed by standards settings bodies or other industry forums that seek to promote the integration of network layers and functions. The terms of such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products. This increases our risks associated with our use of such software and may require us to seek licenses from third parties, to re-engineer our products or to discontinue the sale of such solutions. Difficulty obtaining and maintaining technology licenses with third parties may disrupt development of our products, increase our costs and adversely affect our business.
Data security breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.
In the ordinary course of our business, we maintain on our network systems, and on the networks of our third-party providers, certain information that is confidential, proprietary or otherwise sensitive in nature. This information includes intellectual property, financial information and confidential business information relating to us and our customers, suppliers and other business partners. Companies in the technology industry have been increasingly subjected to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access to networks or sensitive information. Our network systems and storage and other business applications, and the systems and storage and other business applications maintained by our third-party providers, have been in the past, and may be in the future, subjected to attempts to gain unauthorized access, breach, malfeasance or other system disruptions. In some cases, it is difficult to anticipate or to detect immediately such incidents and the damage caused thereby. If an actual or perceived breach of security occurs in our network or any of our third-party providers’ networks, we could incur significant costs and our reputation could be harmed. In addition, the internet has experienced an increase in cyber threats during the COVID-19 pandemic in the form of phishing emails, malware attachments and malicious websites.

While we work to safeguard our internal network systems and validate the security of our third-party providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions will be sufficient to prevent future cyber-attacks or security breaches. We have been subjected in the past, and expect to be subjected in the future, to a range of incidents including phishing, emails purporting to come from a company executive or vendor seeking payment requests, and communications from look-alike corporate domains, as well as security-related risks created by the use of third-party software and services. For example, in December 2020 we learned that SolarWinds, an information technology company, was the subject of a cyberattack that created potential security vulnerabilities for its customers, including Ciena. We believe that none of our products, software or research and development environments were accessed as a result of the SolarWinds attack; however, other similar attacks could have a material adverse impact on our systems and operations. While these types of incidents to which we have been subjected have not had a material effect on our business or our network security to date, future incidents involving access to or improper use of our systems, networks or products could compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations. These security events could also negatively impact our reputation and our competitive position and could result in litigation with third parties, regulatory action, loss of business, potential liability and increased remediation costs, any of which could have a material adverse effect on our financial condition and results of operations.

We are a party to legal proceedings, investigations and other claims or disputes, which are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures, or prevent us from taking certain actions, any of which could adversely affect our business.
In the course of our business, we are, and in the future may be, a party to legal proceedings, investigations and other claims or disputes, which have related and may relate to subjects including commercial transactions, intellectual property, securities, employee relations, or compliance with applicable laws and regulations. Legal proceedings and investigations are inherently uncertain and we cannot predict their duration, scope, outcome or consequences. There can be no assurance that these or any such matters that have been or may in the future be brought against us will be resolved favorably. In connection with any government investigations, in the event the government takes action against us or the parties resolve or settle the matter, we may be required to pay substantial fines or civil and criminal penalties and/or be subject to equitable remedies, including
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disgorgement or injunctive relief. Other legal or regulatory proceedings, including lawsuits filed by private litigants, may also follow as a consequence. These matters are likely to be expensive and time-consuming to defend, settle and/or resolve, and may require us to implement certain remedial measures that could prove costly or disruptive to our business and operations. They may also cause damage to our business reputation. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows.
Changes in trade policy, including the imposition of tariffs and efforts to withdraw from or materially modify international trade agreements, may adversely affect our business, operations and financial condition.
The United States and various foreign governments have established certain trade and tariff requirements under which we have implemented a global approach to the sourcing and manufacture of our products, as well as distribution and fulfillment to customers around the world. Recently, the U.S. government has indicated a willingness to revise, renegotiate, or terminate various existing multilateral trade agreements and to impose new taxes on certain goods imported into the U.S. Because we rely on a global sourcing strategy and third-party contract manufacturers in markets outside of the U.S. to perform substantially all of the manufacturing of our products, such steps, if adopted, could adversely impact our business and operations, increase our costs, and make our products less competitive in the U.S. and other markets. 
For example, our supply chain includes certain direct and indirect suppliers based in China who supply goods to us, our manufacturers or our third-party suppliers. Recently, there have been a number of significant geopolitical events, including trade tensions and regulatory actions, involving the governments of the United States and China. The U.S. government has raised tariffs, and imposed new tariffs, on a wide range of imports of Chinese products, including component elements of our solutions and certain finished goods products that we sell. China has retaliated by raising tariffs, and imposing new tariffs, on certain exports of U.S. goods to China. In May 2020, the U.S. introduced significant further restrictions limiting access to controlled U.S. technology to additional Chinese government and commercial entities, including certain of our competitors based in China. In August 2020, the U.S. Department of Commerce took further action against Huawei by adding additional Huawei affiliates to the Entity List, confirming the expiration of a temporary general license applicable to Huawei and amending the foreign direct product rule in a manner that represents a significant expansion of its application to Huawei. The situation involving U.S.-China trade relations remains volatile and uncertain and there can be no assurance that further actions by either country will not have an adverse impact on our business, operations and access to technology, or components thereof, sourced from China.
At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S., tax policy related to international commerce, or other trade matters. Based on our manufacturing practices and locations, there can be no assurance that any future executive or legislative action in the United States or other countries relating to tax policy and trade regulation would not adversely affect our business, operations and financial results.
Government regulation of usage, import or export of our products, or our technology within our products, changes in that regulation, or our failure to obtain required approvals for our products, could harm our international and domestic sales and adversely affect our revenue and costs of sales. Failure to comply with such regulations could result in enforcement actions, fines, penalties or restrictions on export privileges. In addition, costly tariffs on our equipment, restrictions on importation, trade protection measures and domestic preference requirements of certain countries could limit our access to these markets and harm our sales. These regulations could adversely affect the sale or use of our products, substantially increase our cost of sales and adversely affect our business and revenue.
Changes in government regulations affecting the communications and technology industries and the businesses of our customers could harm our prospects and operating results.
The Federal Communications Commission (the “FCC”) has jurisdiction over many companies in the U.S. telecommunications industry, and similar agencies have jurisdiction over the communication industries in other countries. Many of our largest customers, including service providers and cable and multiservice network operators, are subject to the rules and regulations of these agencies, while others participate in and benefit from government-funded programs that encourage the development of network infrastructures. These regulatory requirements and funding programs are subject to changes that may adversely impact our customers, with resulting adverse impacts on our business.
In December 2017, the FCC deregulated broadband internet access service providers and removed their classification as telecommunications service providers under Title II of the Communications Act. This decision, which was partially upheld in an October 2020 decision by the U.S. Court of Appeals for the District of Columbia Circuit, repeals net neutrality regulations that prohibit blocking, degrading or prioritizing certain types of internet traffic and restores the light touch regulatory treatment of broadband service in place prior to 2015. Although the FCC’s initial decision has preempted state jurisdiction on net neutrality, the U.S. Court of Appeals decision vacated the specific preemption provision in the 2017 order. A number of states have taken
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executive action directed at reinstating aspects of the FCC’s 2015 order. California, among other states, has passed legislation that seeks to reestablish net neutrality.
The current FCC is expected to initiate a rulemaking to reclassify broadband internet access service as a Title II telecommunications service, with additional net neutrality obligations. Changes in regulatory requirements or uncertainty associated with the regulatory environment could delay or serve as a disincentive to investment in network infrastructures by network operators, which could adversely affect the sale of our products and services. Similarly, changes in regulatory tariff requirements or other regulations relating to pricing or terms of carriage on communications networks could slow the development or expansion of network infrastructures and adversely affect our business, operating results, and financial condition.
Separately, certain of our Web-scale customers have been the subject of regulatory and other government actions, including inquiries and investigations, formal or informal, by competition authorities in the United States, Europe and other jurisdictions. In July 2019, the U.S. Department of Justice announced that it would commence an antitrust review into significant online technology platforms, and in September 2019, various state attorneys general announced antitrust investigations involving certain technology companies. In addition, certain committees of the U.S. Congress have recently held hearings and pursued investigations to consider the businesses associated with these platforms, their impact on competition, and their conduct. There can be no assurance that these government actions will not adversely impact the network spending, procurement strategies, or business practices of our Web-scale customers in a manner adverse to us.
The effects of the United Kingdom’s withdrawal from membership in the European Union remain uncertain.
In January 2020, the UK formally withdrew from the EU in an action commonly known as Brexit. It remains possible that the level of economic activity in this region will be adversely impacted by Brexit and that there will be increased regulatory and legal complexities, including those relating to tax, trade, security and employees. Such changes could be costly and potentially disruptive to our operations and business relationships in these markets. Economic uncertainty related to Brexit, including volatility in global stock markets and currency exchange rates, could adversely impact our business. While we have adopted certain operational and financial measures to reduce the risks of doing business internationally, we cannot ensure that such measures will be adequate to allow us to operate without disruption or adverse impact to our business and financial results in the affected regions.

Government regulations related to the environment, climate change and social initiatives could adversely affect our business and operating results.

Our operations are regulated under various federal, state, local and international laws relating to the environment and climate change. If we were to violate or become liable under these laws or regulations, we could incur fines, costs related to damage to property or personal injury and costs related to investigation or remediation activities. Our product design efforts and the manufacturing of our products are also subject to evolving requirements relating to the presence of certain materials or substances in our equipment, including regulations that make producers for such products financially responsible for the collection, treatment and recycling of certain products. For example, our operations and financial results may be negatively affected by environmental regulations, such as the Waste Electrical and Electronic Equipment (WEEE) and Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) that have been adopted by the EU. Compliance with these and similar environmental regulations may increase our cost of designing, manufacturing, selling and removing our products. The SEC requires disclosure regarding the use of “conflict minerals” mined from the Democratic Republic of the Congo and adjoining countries (the “DRC”) and disclosure with respect to procedures regarding a manufacturer’s efforts to prevent the sourcing of such minerals from the DRC. Certain of these minerals are present in our products. SEC rules implementing these requirements may have the effect of reducing the pool of suppliers that can supply “conflict free” components and parts, and we may not be able to obtain conflict free products or supplies in sufficient quantities for our operations. Because our supply chain is complex, we may face reputational challenges with our customers, stockholders and other stakeholders if we are unable to verify sufficiently the origins for the “conflict minerals” used in our products and cannot assert that our products are “conflict free.” Environmental or similar social initiatives may also make it difficult to obtain supply of compliant components or may require us to write off non-compliant inventory, which could have an adverse effect on our business and operating results.
Changes in tax law or regulation, effective tax rates and other adverse outcomes with taxing authorities could adversely affect our results of operations.
Our future effective tax rates could be subject to volatility or adversely affected by changes in tax laws, regulations, accounting principles, or interpretations thereof. The impact of income taxes on our business can also be affected by a number of items relating to our business. These may include estimates for and the actual geographic mix of our earnings; changes in the
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valuation of our deferred tax assets; the use or expiration of net operating losses or research and development credit arrangements applicable to us in certain geographies; and changes in our methodology for transfer pricing, valuing developed technology or conducting intercompany arrangements.

The Tax Act, signed into law in December 2017, introduced significant changes to U.S. federal corporate tax law. Accounting for the income tax effects of the Tax Act requires significant judgments and estimates that are based on then current interpretations of the Tax Act and could be affected by changing interpretations, as well as additional legislation and guidance around the Tax Act. Any refinements to tax estimates are difficult to predict and could impact our financial results. In April 2021, President Joseph R. Biden released the Made in America Tax Plan, which includes significant modifications to key provisions of the existing U.S. corporate income tax regime, including an increased tax rate, promotion of a global minimum tax and other changes that address taxes on profits from intangible assets and activities of foreign subsidiaries. In June 2021, finance leaders of the Group of Seven countries agreed to back a new global minimum tax rate that would apply regardless of headquarters location or physical presence, and in October 2021, the leaders of the Group of 20 agreed to back similar plans. In August 2021, the Senate Finance Committee released draft legislation that would overhaul the international tax provisions of the Tax Act and address taxes on profits from intangible assets and activities of foreign subsidiaries. Although it is uncertain if some or all of these proposals will be enacted, a significant change in U.S. tax law, or that of other countries where we operate or have a presence, may materially and adversely impact our income tax liability, provision for income taxes, effective tax rate and results of operations.

We are also subject to the continuous examination of our income tax and other returns by the Internal Revenue Service and other tax authorities globally, and we have a number of such reviews underway at any time. It is possible that tax authorities may disagree with certain positions we have taken and an adverse outcome of such a review or audit could have a negative effect on our financial position and operating results. There can be no assurance that the outcomes from such examinations, or changes in tax law or regulation impacting our effective tax rates, will not have an adverse effect on our business, financial condition and results of operations.

Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include in our annual report a report containing management’s assessment of the effectiveness of our internal controls over financial reporting as of the end of our fiscal year and a statement as to whether or not such internal controls are effective. Compliance with these requirements has resulted in, and is likely to continue to result in, significant costs and the commitment of time and operational resources. Certain ongoing initiatives, including efforts to transform business processes or to transition certain functions to third-party resources or providers, will necessitate modifications to our internal control systems, processes and related information systems as we optimize our business and operations. Our expansion into new regions could pose further challenges to our internal control systems. We cannot be certain that our current design for internal control over financial reporting, or any additional changes to be made, will be sufficient to enable management to determine that our internal controls are effective for any period, or on an ongoing basis. If we are unable to assert that our internal controls over financial reporting are effective, market perception of our financial condition and the trading price of our stock may be adversely affected, and customer perception of our business may suffer.
Risks Related to Our Common Stock, Indebtedness and Investments
Our stock price is volatile.
Our common stock price has experienced substantial volatility in the past and may remain volatile in the future. Volatility in our stock price can arise as a result of a number of the factors discussed in this “Risk Factors” section. During fiscal 2021, our closing stock price ranged from a high of $60.77 per share to a low of $39.15 per share. The stock market has experienced significant price and volume fluctuation that has affected the market price of many technology companies, with such volatility often unrelated to the operating performance of these companies. Divergence between our actual results and our forward-looking guidance for such results, the published expectations of investment analysts, or the expectations of the market generally, can cause significant swings in our stock price. Our stock price can also be affected by market conditions in our industry as well as announcements that we, our competitors, vendors or our customers may make. These may include announcements by us or our competitors of financial results or changes in estimated financial results, technological innovations, the gain or loss of customers, or other strategic initiatives. Our common stock is also included in certain market indices, and any change in the composition of these indices to exclude our company would adversely affect our stock price. These and other factors affecting macroeconomic conditions or financial markets may materially adversely affect the market price of our common stock in the future.
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Outstanding indebtedness under our senior secured credit facilities may adversely affect our liquidity and results of operations and could limit our business.
We are a party to credit agreements relating to a $300 million senior secured asset-based revolving credit facility and an outstanding senior secured term loan with approximately $680.9 million repayable at maturity in fiscal 2025. The agreements governing these credit facilities contain certain covenants that limit our ability, among other things, to incur additional debt, create liens and encumbrances, pay cash dividends, redeem or repurchase stock, enter into certain acquisition transactions or transactions with affiliates, repay certain indebtedness, make investments, or dispose of assets. The agreements also include customary remedies, including the right of the lenders to take action with respect to the collateral securing the loans, that would apply should we default or otherwise be unable to satisfy our debt obligations.
Our indebtedness could have important negative consequences, including:
increasing our vulnerability to adverse economic and industry conditions;
limiting our ability to obtain additional financing, particularly in unfavorable capital and credit market conditions;
debt service and repayment obligations that may adversely impact our results of operations and reduce the availability of cash resources for other business purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the markets; and
placing us at a possible competitive disadvantage to competitors that have better access to capital resources.
We may also enter into additional debt transactions or credit facilities, including equipment loans, working capital lines of credit, senior notes and other long-term debt, which may increase our indebtedness and result in additional restrictions on our business. In addition, major debt rating agencies regularly evaluate our debt based on a number of factors. There can be no assurance that we will be able to maintain our existing debt ratings, and failure to do so could adversely affect our cost of funds, liquidity and access to capital markets.
Significant volatility and uncertainty in the capital markets may limit our access to funding on favorable terms or at all.
The operation of our business requires significant capital. We have accessed the capital markets in the past and have successfully raised funds, including through the issuance of equity, convertible notes and other indebtedness, to increase our cash position, support our operations and undertake strategic growth initiatives. We regularly evaluate our liquidity position, debt obligations and anticipated cash needs to fund our long-term operating plans, and we may consider it necessary or advisable to raise additional capital or incur additional indebtedness in the future. If we raise additional funds through further issuance of equity or securities convertible into equity, or undertake certain transactions intended to address our existing indebtedness, our existing stockholders could suffer dilution in their percentage ownership of our company, or our leverage and outstanding indebtedness could increase. Global capital markets have undergone periods of significant volatility and uncertainty in the past, and there can be no assurance that such financing alternatives will be available to us on favorable terms or at all, should we determine it necessary or advisable to seek additional capital.
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Item 1B. Unresolved Staff Comments
Not applicable.

Item 2. Properties
Overview. As of October 30, 2021, all of our properties are leased, and we do not own any real property. We lease facilities globally related to the ongoing operations of our business segments and related functions. Our principal executive offices are located in one building in Hanover, Maryland.
Our largest facilities are our research and development centers located in Ottawa, Canada and Gurgaon, India. We also have engineering facilities located in San Jose, California; Alpharetta, Georgia; Quebec, Canada; and Pune and Bangalore, India. In addition, we lease various smaller offices in the United States, Canada, Mexico, South America, Europe, the Middle East and the Asia Pacific region to support our sales and services operations. We believe the facilities we are now using are adequate and suitable for our business requirements.
Hanover, Maryland Headquarters Lease. We entered into an agreement dated November 3, 2011, with W2007 RDG Realty, L.L.C. relating to a 15-year lease of office space for our corporate headquarters in Hanover, Maryland, consisting of an agreed-upon rentable area of approximately 105,000 square feet.
Ottawa Leases. On October 23, 2014, Ciena Canada, Inc. entered into an 18-year lease agreement for the office building located at 5050 Innovation Drive, Ottawa, Canada, consisting of a rentable area of approximately 170,000 square feet. In addition, on April 15, 2015, Ciena Canada, Inc. entered into a 15-year lease agreement for two new office buildings adjacent to the building at 5050 Innovation Drive, located at 383 and 385 Terry Fox Drive, Ottawa, Canada, consisting of a rentable area of approximately 255,000 square feet.
Gurgaon Leases. On August 13, 2020, Ciena India Pvt. Ltd. extended our rental agreement for five years for an office building located at Plot No. 13, Echelon Institutional Sector 32, Gurgaon, which is adjacent to another building rented by Ciena India Pvt. Ltd., located at Plot No. 14, Echelon Institutional Sector 32, Gurgaon. The Gurgaon offices consist of a rentable area of approximately 282,000 square feet.
For additional information regarding our lease obligations, see Note 18 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.
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Item 3. Legal Proceedings

The information set forth under the heading “Litigation” in Note 27 to our Consolidated Financial Statements in Item 8 of Part II of this report, is incorporated herein by reference.

Item 4. Mine Safety Disclosures
    
Not applicable.

PART II
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Item 5. Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities
(a) Our common stock is traded on the New York Stock Exchange under the stock symbol “CIEN.”
As of December 10, 2021, there were approximately 757 holders of record of our common stock and 154,882,650 shares of common stock outstanding. We have never paid cash dividends on our capital stock. We currently intend to retain earnings for use in our business, and we do not anticipate paying any cash dividends in the foreseeable future.
Issuer Purchases of Equity Securities
The following table provides a summary of repurchases of our common stock during the fourth quarter of fiscal 2021:
PeriodTotal Number of Shares Purchased (1)Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in Thousands)
August 1, 2021 to August 28, 2021141,838 $56.42 141,838 $202,031 
August 29, 2021 to September 25, 2021147,640 $54.20 147,640 $194,028 
September 26, 2021 to October 30, 2021204,032 $52.58 204,032 $183,301 
Total
493,510 $54.17 493,510 
(1) On December 13, 2018, we announced that our Board of Directors authorized a program to repurchase up to $500 million of our common stock. Shares reported in this table were repurchased under this program. Subsequent to the end of fiscal 2021, on December 9, 2021, we announced that our Board of Directors authorized a program to repurchase up to $1.0 billion of our common stock, which replaced in its entirety the previous stock repurchase program. The program may be modified, suspended, or discontinued at any time. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow, stock price and general business and market conditions. On December 13, 2021, in connection with this repurchase program, we entered into an accelerated share repurchase agreement for the repurchase of $250.0 million of our common stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources -Stock Repurchase Authorization” in Item 7 of Part II of this report and Note 22 and 28 to our Consolidated Financial Statements in Item 8 of Part II of this report for information regarding the stock repurchase programs authorized by our Board of Directors.

Stock Performance Graph

The following graph shows a comparison of cumulative total returns for an investment in our common stock, the S&P North American Technology-Multimedia Networking Index and the Russell 1000 from October 31, 2016 to October 30, 2021. The Russell 1000 index comprises the stocks representing the 1,000 largest publicly traded American companies as measured by market capitalization. The S&P North American Technology-Multimedia Networking Index comprises stocks in the S&P Total Market Index that are classified under the Global Industry Classification Standard communications equipment sub-industry. This graph is not deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the graph shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act of 1933, as amended, or the Exchange Act.
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cien-20211030_g1.jpg

Assumes $100 invested in Ciena Corporation, the S&P North American Technology-Multimedia Networking Index and the Russell 1000, respectively, on October 31, 2016 with all dividends reinvested at month-end.
(b) Not applicable.
(c) Not applicable.

Item 6. [Reserved]
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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this annual report.

Overview

We are a networking systems, services and software company, providing solutions that enable a wide range of network operators to deploy and manage next-generation networks that deliver services to businesses and consumers. We provide hardware, software and services that enable the transport, routing, switching, aggregation, service delivery and management of video, data and voice traffic on communications networks. Our solutions are used by communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education institutions and emerging network operators.

Our portfolio is designed to enable what we refer to as the Adaptive Network™, our vision for a network end state that emphasizes a programmable and scalable network infrastructure, software control and automation capabilities, network analytics and intelligence, and related advanced services. By transforming network infrastructures into a dynamic, programmable environment driven by automation and analytics, network operators can realize greater business agility, dynamically adapt to changing end-user service demands and rapidly introduce new revenue-generating services. They can also gain valuable real-time network insights, allowing them to optimize network operation and maximize the return on their network infrastructure investment.

Our solutions include Networking Platforms, including our Converged Packet Optical and Routing and Switching portfolios, which can be applied from the network core to end-user access points, and which allow network operators to scale capacity, increase transmission speeds, allocate traffic efficiently and adapt dynamically to changing end-user service demands. Our Converged Packet Optical portfolio includes products that support the connection of content to content, including in long haul and regional, submarine and data center interconnect networks, and users to content, including in metro and edge networks. Our Routing and Switching portfolio includes products and solutions that enable efficient IP transport in next-generation metro edge, access and aggregation networks, connecting users to content in applications that include 5G and Internet of Things, mobile backhaul, optical access, virtualization and enterprise services.

To complement our Networking Platforms, we offer Platform Software, which includes a wide array of software solutions that deliver operations, administration, maintenance, and provisioning (“OAM&P”) functionality, as well as domain control, orchestration, operational support systems (“OSS”) and service assurance to achieve closed loop automation across multi-vendor and multi-domain network environments. Through our Blue Planet® Software suite, we enable customers to accelerate the digital transformation of their networks through service lifecycle automation.

In addition to our systems and software, we also offer a broad range of services that help our customers build, operate and improve their networks and associated operational environments. These include network transformation, consulting, implementation, systems integration, maintenance, network operations center (“NOC”) management, and optimization services.

Supply Chain Constraints

Due to increased demand across a range of industries, the global supply market for certain raw materials and components, including, in particular, the semiconductor components used in most of our products, has experienced significant disruption in recent periods. These conditions, which worsened during the second half of fiscal 2021, have been exacerbated in part by the COVID-19 pandemic. As a result, we have experienced ongoing component shortages, longer lead times and increased cost of components, particularly relating to semiconductors. Some of our suppliers have indicated that, as a result of current constraints, they intend to cease manufacturing of certain components used in our products. These conditions have impacted the lead times for our products, and could adversely impact our ability to meet customer demand where we cannot timely secure supply of these components. In response, we have implemented mitigation strategies and increased our purchases of inventory for certain components. In some cases, we have incurred higher costs to secure available inventory, or have extended our purchase commitments or placed non-cancellable orders with suppliers, which introduces inventory risk if our forecasts and assumptions are inaccurate.

We expect these constrained supply conditions to increase our costs of goods sold and to adversely impact our ability to continue to reduce the cost to produce our products in a manner consistent with prior periods. The current supply conditions can also be expected to adversely impact our gross margin as well as the level and timing of our revenue during fiscal 2022. We believe these supply chain challenges and their adverse impact on our business and financial results will persist, at least through
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the first half of calendar 2022, and may extend into periods thereafter. See “Risk Factors” in Item 1A of Part I of this report for further discussion of risks related to our supply chain.

Impact of the COVID-19 Pandemic on our Business and Operations

In response to the COVID-19 pandemic, we have prioritized the safety of our employees and business partners, while continuing to support the needs of our customers and communities during this unprecedented period. We have also implemented business continuity plans designed to minimize potential business disruption from the COVID-19 pandemic and to protect our supply chain and customer fulfillment and support operations. During fiscal 2021, the COVID-19 pandemic continued to affect our business operations, including as set forth below.

Demand for Products & Services. The demand environment for our products and services remains dynamic and continues to be impacted by the effects of the COVID-19 pandemic. For example, we experienced a constrained spending environment during the second half of fiscal 2020 and the first quarter of fiscal 2021 that adversely impacted our revenue during that period. During the remainder of fiscal 2021, we experienced significantly stronger order volumes for our products and services, particularly among a concentrated set of larger customers with which we have existing positions as a supplier. This improved demand environment and growth in order volumes contributed to our increased revenue in the second half of fiscal 2021 compared to the first half of fiscal 2021. We believe some portion of these orders reflects certain short-term customer purchasing behaviors, including network operators addressing capacity and network requirements following a period of constrained spending in previous quarters, and possible acceleration of future orders due to the implementation of security of supply strategies amidst global supply constraints for semiconductor components. Over the longer term, we continue to believe that the increased demands placed on network infrastructures as a result of the COVID-19 pandemic, and the related increase in remote working worldwide, have accelerated certain trends, including cloud network adoption, networking resilience and flexibility, and enhanced network automation.
Services and Customer Fulfillment. During fiscal 2020 and fiscal 2021, we experienced some disruption in our ability to provide installation, professional and fulfillment services to customers due to site readiness and access limitations, limited customer availability, project delays or re-prioritization by customers, and travel bans or restrictions on movement or gatherings. We have also experienced some disruption and delays in our supply chain operations and logistics, including shipping delays and higher transport costs. The duration and severity of conditions in the future is uncertain and, as a result, may continue to adversely impact our revenue and results of operations.
Sales & Marketing. Restrictions on travel due to COVID-19 and limitations on interactions with customers, such as field and lab trials, have continued to negatively impact our ability to carry out certain sales and marketing activities, including our ability to secure new customers, to qualify and sell new products, and to grow sales with customers. Customer delays in operationalizing new network projects during fiscal 2021 that we anticipated occurring on their original timelines adversely affected our revenue. Conversely, our recent gross margin performance during fiscal 2021 benefited from these dynamics, with a larger percentage of our revenue comprised of existing business, as compared to new design wins and early in life projects, which tend to have lower margins.
Canada Emergency Wage Subsidy (“CEWS”). In April 2020, the government of Canada introduced the CEWS program to help employers offset a portion of their employee wages for a limited period in response to the COVID-19 outbreak, retroactive to March 15, 2020. Amounts from the CEWS program positively impacted our operating expense and measures of profit for the fiscal year ended October 30, 2021. For the fiscal year ended October 30, 2021, we recorded CEWS benefits of CAD$52.2 million ($41.3 million), net of certain fees, related to claim periods beginning March 15, 2020, including CAD$43.9 million ($35.4 million) related to employee wages from fiscal 2020. The CEWS program has expired and we do not anticipate a similar impact on our financial results in future periods. See Note 3 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information.
The COVID-19 pandemic and countermeasures taken to contain its spread have caused economic and financial disruptions globally. We continue to monitor the situation and actively assess further implications for our business, supply chain, fulfillment operations and customer demand. However, the COVID-19 pandemic and its impact remain dynamic. Variants continue to emerge, efforts to mitigate or contain the impacts of the pandemic continue to evolve, and the duration and severity of the impact of the pandemic on our business and results of operations in future periods remain uncertain. If the COVID-19 pandemic or its adverse effects become more severe or prevalent or are prolonged in the locations where we, our customers, suppliers or manufacturers conduct business, or we experience more pronounced disruptions in our business or operations, or in economic activity and demand for our products and services generally, our business and results of operations in future periods could be materially adversely affected.
Supply Chain and Distribution Structure; Recognition of Deferred Tax Asset in Fiscal 2021
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To better accommodate the requirements of a global business, we are implementing a plan to reorganize our global supply chain and distribution structure more substantially, which includes a legal entity reorganization and related system upgrade. We completed the first phase of this plan in fiscal 2021, and expect to continue to implement the plan during the first half of fiscal 2022. As part of this reorganization, we completed an internal transfer of certain of our non-U.S. intangible assets, which created amortizable tax basis resulting in the discrete recognition of $119.3 million as a deferred tax asset with a corresponding tax benefit. The impact of this transfer is reflected in our effective tax rate for the year ended October 30, 2021, and had a significant, one-time impact on our net income for the period.

Market Opportunity

The markets in which we sell our communications networking solutions are dynamic and are characterized by a high rate of change, including rapid growth in bandwidth demand and network traffic, the proliferation of cloud-based services and new approaches, or “consumption models,” for designing and procuring networking solutions. Emerging services and applications, including 5G mobile communications, Fiber Deep and the Internet of Things, are further impacting or expected to impact wireline network infrastructures, particularly at the edge of networks, where increased computing power and automation are required to provide the quality of experience demanded by end users. Many network operators are under pressure to constrain their capital expenditure budgets, as they cannot grow their network spending at the rate of bandwidth growth. To address these growing service demands and manage network cost, many network operators are looking to adopt next-generation infrastructures that are more programmable and better capable of leveraging data for network insight, analytics and automation. Other network operators are pursuing a diverse range of consumption models in their design and procurement of network infrastructure solutions. Our Adaptive Network vision and our business strategy to capitalize on these changing market dynamics include the initiatives set forth in the “Strategy” section of the description of our business in Item 1 of Part 1 of this annual report.
Business Diversification
A key element of our strategy is to continue to diversify our solutions offerings, customer base and geographic reach to address fast-growing applications and markets. We believe that the continued diversification of our business is important to address the dynamic industry environment in which we operate, to grow our business, and to withstand potential slowdowns adversely affecting particular geographies, markets or customer segments. We believe this diversification has allowed us to maintain a greater degree of stability, to remain resilient and to continue to grow our business despite the impact of the COVID-19 pandemic on any particular geography, segment or customer account.

Investment in Technology Innovation

We are focused on growing our optical and packet infrastructure business by addressing fast-growing markets and applications, including data center interconnection, packet aggregation and routing and submarine networks. In fiscal 2021, we brought to market our footprint-optimized WaveLogic 5 Nano 100G-400G coherent pluggable transceivers. We are also developing Routing and Switching solutions with enhanced IP/Ethernet capabilities to expand our addressable market into additional next generation metro and access applications including packet routing, aggregation and switching, 5G cross-haul, Fiber Deep, and edge computing. In fiscal 2021, we also added several new routing platforms to support the demands of mobile xHaul (fronthaul, midhaul and backhaul) transport. During the first quarter of fiscal 2022, we acquired AT&T’s Vyatta virtual routing and switching technology, which is intended to expand and accelerate our Adaptive IP solutions and address the growing market opportunity to transform the edge, including 5G networks and cloud environments. See Note 28 to our Consolidated Financial Statements included in Item 8 of Part II of this report for more information on this acquisition and the related accounting.

Fiscal Year-End Backlog

Generally, we make sales pursuant to purchase orders placed by customers under framework agreements that govern the general commercial terms and conditions of the sale of our products and services. These agreements do not obligate customers to purchase any minimum or guaranteed order quantities. Moreover, we are periodically awarded business for new network opportunities or network upgrades following a selection process. In calculating backlog, we only include (i) customer purchase orders for products that have not been shipped and for services that have not yet been performed; and (ii) customer orders relating to products that have been delivered and services that have been performed, but are awaiting customer acceptance under the applicable contract terms. Generally, our customers may cancel or change their orders with limited advance notice, or they may decide not to accept our products and services, although instances of both cancellation and non-acceptance are rare. Backlog may be fulfilled several quarters following receipt of a purchase order, or in the case of certain service obligations, may relate to multi-year support period. As a result, backlog should not necessarily be viewed as an accurate indicator of future revenue for any particular period.
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Our backlog was $2.17 billion as of October 30, 2021 as compared to $1.19 billion as of October 31, 2020. Backlog includes product and service orders from commercial and government customers combined, and our significant annual growth reflects the demand dynamics described above. Backlog at October 30, 2021 includes approximately $241.7 million primarily related to orders for products and maintenance and support services that are not expected to be filled or performed within fiscal 2022. Because backlog can be defined in different ways by different companies, our presentation of backlog may not be comparable with figures presented by other companies in our industry.

Consolidated Results of Operations

A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 is presented below. A discussion of fiscal 2020 compared to fiscal 2019 can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020, filed with the SEC on December 18, 2020 (our “2020 Annual Report”), which is available free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at investor.ciena.com.
Operating Segments

Our results of operations are presented based on the following operating segments: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. Effective as of the beginning of fiscal 2021, we renamed our “Packet Networking” product line “Routing and Switching.” This change was made on a prospective basis and does not impact comparability of previous financial results or the composition of this product line. References to our “Packet Networking” product line in prior periods have been changed to “Routing and Switching” in this report. See Notes 2 and 25 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information on our segment reporting.

Fiscal 2021 Compared to Fiscal 2020

Revenue

Currency Fluctuations

During fiscal 2021, approximately 16.4% of our revenue was non-U.S. Dollar denominated, primarily including sales in Euros, Canadian Dollars, Brazilian Reais, British Pounds, Japanese Yen, and Indian Rupee. During fiscal 2021, as compared to fiscal 2020, the U.S. Dollar primarily weakened against these and other currencies. Consequently, our revenue reported in U.S. Dollars slightly increased by approximately $21.8 million, or 0.6%, as compared to fiscal 2020.

Operating Segment Revenue

The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):
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 Fiscal Year 
2021%*2020%*Increase (decrease)%**
Revenue:    
Networking Platforms
Converged Packet Optical$2,553,509 70.5$2,547,647 72.1$5,862 0.2
Routing and Switching271,796 7.5267,416 7.64,380 1.6
Total Networking Platforms2,825,305 78.02,815,063 79.710,242 0.4
  Platform Software and Services229,588 6.4197,809 5.631,779 16.1
Blue Planet Automation Software and Services
77,247 2.162,632 1.814,615 23.3
Global Services
Maintenance Support and Training283,350 7.8269,354 7.613,996 5.2
Installation and Deployment171,489 4.7152,003 4.319,486 12.8
Consulting and Network Design33,705 1.035,296 1.0(1,591)(4.5)
Total Global Services488,544 13.5456,653 12.931,891 7.0
Consolidated revenue$3,620,684 100.0$3,532,157 100.0$88,527 2.5
_________________________________
*Denotes % of total revenue
**Denotes % change from 2020 to 2021
Networking Platforms segment revenue increased, reflecting product line sales increases of $5.9 million of our Converged Packet Optical products and $4.4 million of our Routing and Switching products.
Converged Packet Optical sales increased, primarily reflecting sales increases of $88.4 million of our Waveserver® products and $45.6 million of our 6500 Reconfigurable Line System (RLS), primarily to communication service providers. These sales increases were partially offset primarily by sales decreases of $75.7 million of our 6500 Packet-Optical Platform primarily to enterprise customers and communication service providers and $40.2 million of our 5400 family of Packet-Optical Platforms primarily to communications service providers.
Routing and Switching sales increased, primarily reflecting sales increases of $10.9 million of our platform independent software and $8.1 million of our 3000 and 5000 families of service delivery and aggregation switches to communication service providers. These increases were partially offset by a sales decrease of $12.5 million of our 8700 Packetwave Platform primarily to government customers.
Platform Software and Services segment revenue increased, reflecting an increase of $33.2 million in services, primarily to communication service providers. This sales increase was partially offset by a $1.5 million decrease in software sales. The software sales decrease was primarily due to declines in sales of $4.0 million of our OneControl Unified Management System software and $2.9 million of our other legacy software solutions, partially offset by increased sales of $5.1 million of our MCP software platform. We continue to pursue further customer adoption of our MCP software platform and its enhanced features and functionality. As we transition existing customers as well as features and functionality from our legacy software to this platform, we expect revenue declines for our legacy software solutions within this segment.
Blue Planet Automation Software and Services segment revenue increased, reflecting increases of $9.0 million of software and $5.6 million in software services.
Global Services segment revenue increased, primarily reflecting sales increases of $19.5 million of our installation and deployment services and $14.0 million of our maintenance support and training, partially offset by a sales decrease of $1.6 million of our consulting and network design services.

Revenue by Geographic Region

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Our operating segments engage in business and operations across three geographic regions: Americas; Europe, Middle East and Africa (“EMEA”) and Asia Pacific, Japan and India (“APAC”). The geographic distribution of our revenue can fluctuate significantly from period to period, and the timing of revenue recognition for large network projects, particularly outside of the United States, can result in large variations in geographic revenue results in any particular period. The increase in our EMEA region revenue for fiscal 2021 was primarily driven by increased sales in the United Kingdom, France and the Netherlands. The increase in our Americas region revenue for fiscal 2021 was primarily driven by increased sales in the United States, Canada, and Brazil. The decrease in our APAC region revenue for fiscal 2021 was primarily driven by decreased sales in Japan, Singapore and Australia, partially offset by increased sales in India. The following table reflects our geographic distribution of revenue, which is principally based on the relevant location for our delivery of products and performance of services. Our revenue, when considered by geographic distribution, can fluctuate significantly, and the timing of revenue recognition for large network projects, particularly outside of the United States, can result in large variations in geographic revenue results in any particular period. The table below sets forth the changes in geographic distribution of revenue for the periods indicated (in thousands, except percentage data):
 Fiscal Year  
2021%*2020%*Increase
(decrease)
%**
Americas$2,525,619 69.8$2,469,278 69.9$56,341 2.3
EMEA670,462 18.5591,468 16.878,994 13.4
APAC424,603 11.7471,411 13.3(46,808)(9.9)
Total$3,620,684 100.0$3,532,157 100.0$88,527 2.5
_________________________________
*Denotes % of total revenue
**Denotes % change from 2020 to 2021
Americas revenue increased, reflecting sales increases of $18.4 million within our Networking Platforms segment, $13.3 million within our Platform Software and Services segment, $12.4 million within our Global Services segment and $12.3 million within our Blue Planet Automation Software and Services segment.
EMEA revenue increased, reflecting sales increases of $47.5 million within our Networking Platforms segment, $17.4 million within our Global Services segment, $8.7 million within our Platform Software and Services segment and $5.4 million within our Blue Planet Automation Software and Services segment. These sales increases were primarily due to increased sales to Web-scale providers in the Netherlands and the United Kingdom, and communications service providers in France and the United Kingdom.
APAC revenue decreased, primarily reflecting sales decreases of $55.6 million within our Networking Platforms segment and $3.0 million within our Blue Planet Automation Software and Services segment. These decreases were partially offset by sales increases of $9.8 million within our Platform Software and Services segment and $2.1 million within our Global Services segment. Our Networking Platforms segment revenue sales decreases were primarily due to decreased sales to communications service providers in Japan, enterprise customers in Australia, and Web-scale providers in Singapore, partially offset by increased sales to enterprise customers in India.

In fiscal 2021 and fiscal 2020, our top ten customers contributed 55.5% and 54.5% of our revenue, respectively. Consequently, our financial results are closely correlated with the spending of a relatively small number of customers and can be significantly affected by market, industry or competitive dynamics affecting the businesses of those customers. Our reliance on a relatively small number of customers increases our exposure to changes in their spending levels, network priorities and purchasing strategies. The loss of a significant customer could have a material adverse effect on our business and results of operations, and our results of operations can fluctuate quarterly depending on sales volumes and purchasing priorities with these large customers. Sales to AT&T were $447.4 million, or 12.4% of total revenue, in fiscal 2021, and $373.2 million, or 10.6% of total revenue, in fiscal 2020. No other customer accounted for greater than 10% of our revenue in fiscal 2021 or fiscal 2020.

While drivers of bandwidth growth and network evolution remain strong, many of our network operator customers are under pressure to constrain their capital expenditure budgets, and their businesses cannot grow their network spending at the rate of bandwidth growth. As a result, as we innovate and introduce new and more robust solutions that increase capacity or add features, there is a market expectation for solutions that are more cost-effective than existing or competing solutions and that new products consistently deliver lower price per bit performance. The combination of this regular technology-driven price compression, price competition in our markets and ongoing customer efforts to manage network costs can impact our growth rates and requires that we increase our volume of product shipments to maintain and grow revenue.
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Cost of Goods Sold and Gross Profit

Product cost of goods sold consists primarily of amounts paid to third-party contract manufacturers, component costs, employee-related costs and overhead, shipping and logistics costs associated with manufacturing-related operations, warranty and other contractual obligations, royalties, license fees, amortization of intangible assets, cost of excess and obsolete inventory and, when applicable, estimated losses on committed customer contracts.

Services cost of goods sold consists primarily of direct and third-party costs associated with our provision of services including installation, deployment, maintenance support, consulting and training activities, and, when applicable, estimated losses on committed customer contracts. The majority of these costs relate to personnel, including employee and third-party contractor-related costs.

Our gross profit as a percentage of revenue, or “gross margin,” can fluctuate due to a number of factors, particularly when viewed on a quarterly basis. Our gross margin can fluctuate and be adversely impacted depending on our revenue concentration within a particular segment, product line, geography, or customer, including our success in selling software in a particular period. Our gross margin remains highly dependent on our continued ability to drive annual product cost reductions relative to the price erosion that we regularly encounter in our markets. This can be challenging, particularly within the current supply constrained environment. Moreover, we are often required to compete with aggressive pricing and commercial terms, and, to secure business with new and existing customers, we may agree to pricing or other unfavorable commercial terms that adversely affect our gross margin. Success in taking share and winning new business can result in additional pressure on gross margin from these pricing dynamics and the early stages of these network deployments. Early stages of new network builds also often include an increased concentration of lower margin “common” equipment, photonics sales and installation services, with the intent to improve margin as we sell channel cards and maintenance services to customers as they add capacity and need to monitor their networks. Gross margin can be impacted by technology-based price compression and the introduction or substitution of new platforms with improved price for performance as compared to existing solutions that carry higher margins. Gross margin can also be impacted by changes in expense for excess and obsolete inventory and warranty obligations.

Service gross margin can be affected by the mix of customers and services, particularly the mix between deployment and maintenance services, geographic mix and the timing and extent of any investments in internal resources to support this business.

In fiscal 2021, we recorded CEWS benefits of $7.0 million, net of certain fees, related to the particular line item within costs of goods sold in our Consolidated Statement of Operations to which the grant activity related. For further information relating to our receipt of amounts under the CEWS program, see Note 3 to our Consolidated Financial Statements included in Item 8 of Part II of this report. The tables below set forth the changes in revenue, cost of goods sold and gross profit for the periods indicated (in thousands, except percentage data):

 Fiscal Year  
2021%*2020%*Increase
(decrease)
%**
Total revenue$3,620,684 100.0$3,532,157 100.0$88,527 2.5
Total cost of goods sold1,898,705 52.41,879,266 53.219,439 1.0
Gross profit$1,721,979 47.6$1,652,891 46.8$69,088 4.2
_________________________________
*Denotes % of total revenue
**Denotes % change from 2020 to 2021
 Fiscal Year  
2021%*2020%*Increase
(decrease)
%**
Product revenue$2,932,602 100.0$2,914,790 100.0$17,812 0.6
Product cost of goods sold1,545,269 52.71,573,791 54.0(28,522)(1.8)
Product gross profit$1,387,333 47.3$1,340,999 46.0$46,334 3.5
_________________________________
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*Denotes % of product revenue
**Denotes % change from 2020 to 2021
 Fiscal Year  
2021%*2020%*Increase
(decrease)
%**
Service revenue$688,082 100.0$617,367 100.0$70,715 11.5
Service cost of goods sold353,436 51.4305,475 49.547,961 15.7
Service gross profit$334,646 48.6$311,892 50.5$22,754 7.3
_________________________________
*Denotes % of service revenue
**Denotes % change from 2020 to 2021
Gross profit as a percentage of revenue increased by $69.1 million. Gross profit as a percentage of total revenue (“gross margin”) increased by 80 basis points. Our gross margin benefited from product cost reductions and a $7.0 million benefit from the CEWS program, partially offset by market-based price compression that we encountered during the period and a reduction in our services gross margin. Due to the impact of COVID-19 and related restrictions on sales and marketing activities described in “Overview” above, a higher proportion of our fiscal 2021 revenue consisted of sales of existing technology offerings deployed in the networks of existing customers, as compared to sales to new customers, early stage network deployments for recent design wins, or the introduction of new platforms, all of which tend to carry lower margins. We expect our future gross margins to reduce from these elevated short-term levels as the adverse impact of the pandemic on new business lessens and our overall revenue resumes a more typical composition of revenue from existing and new business. Moreover, as described in “Overview” above, we expect the current market shortage for semiconductor components and constrained supply environment to increase our costs of goods sold and to adversely impact our gross margin during fiscal 2022. We believe these supply chain challenges and their adverse impact on our business and financial results will persist, at least through the first half of calendar 2022, and may extend into periods thereafter.
Gross profit on products as a percentage of product revenue increased by $46.3 million. Gross profit on products as a percentage of product revenue (“product gross margin”) increased by 130 basis points, primarily due to product cost reductions and a $4.3 million benefit from the CEWS program, partially offset by market-based price compression we encountered during the period as mentioned above.
Gross profit on services as a percentage of services revenue increased by $22.8 million. Gross profit on services as a percentage of service revenue (“service gross margin) decreased by 190 basis points, primarily due to lower installation and deployment margins. The lower margins on installation and deployment services were primarily due to certain customer site readiness delays that caused cost inefficiencies. Lower service margins were also driven by higher compensation costs associated with our annual cash incentive compensation plan. These lower margins were partially offset by a $2.7 million benefit from the CEWS program.

Operating Expense

Currency Fluctuations

During fiscal 2021, approximately 49.4% of our operating expense was non-U.S. Dollar denominated, including Canadian Dollars, Indian Rupees, British Pounds and Euros. During fiscal 2021 as compared to fiscal 2020, the U.S. Dollar primarily weakened against these and other currencies. Consequently, our operating expense reported in U.S. Dollars increased by approximately $15.1 million, or 1.2%, net of hedging.

CEWS Program Benefits

In fiscal 2021, we recorded CEWS benefits of $34.3 million, net of certain fees, related to the particular line item within operating expense in our Consolidated Statement of Operations to which the grant activity related. For further information relating to our receipt of amounts under the CEWS program, see Note 3 to our Consolidated Financial Statements included in Item 8 of Part II of this report.
Operating expense increased in fiscal 2021 from the level reported for fiscal 2020 primarily due to an increase in certain variable compensation costs associated with our annual cash incentive compensation plan, offset by decreases in travel and
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entertainment costs as a result of the impact of COVID-19. We expect operating expense to continue to increase from the level reported in fiscal 2021 primarily due to planned investment in research and development to advance our strategy and our expectation that customer engagement and related travel and entertainment costs will begin to normalize.

Operating expense consists of the component elements described below.

Research and development expense primarily consists of salaries and related employee expense (including share-based compensation expense), prototype costs relating to design, development, product testing, depreciation expense, and third-party consulting costs.

Selling and marketing expense primarily consists of salaries, commissions and related employee expense (including share-based compensation expense) and sales and marketing support expense, including travel, demonstration units, trade show expense, and third-party consulting costs.

General and administrative expense primarily consists of salaries and related employee expense (including share-based compensation expense) and costs for third-party consulting and other services.

Significant asset impairments and restructuring costs primarily reflect actions we have taken to improve the alignment of our workforce, facilities and operating costs with perceived market opportunities, business strategies, changes in market and business conditions, the redesign of certain business processes and significant impairments of assets.

Amortization of intangible assets primarily reflects the amortization of both purchased technology and the value of customer relationships derived from our acquisitions.

Acquisition and integration costs primarily consist of employee-related costs associated with a three-year earn-out arrangement related to the acquisition of DonRiver Holdings, LLC (“DonRiver”) in fiscal 2018 and other fees related to the acquisition of Centina Systems, Inc. (“Centina”) in fiscal 2020.

The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):
 Fiscal Year  
2021%*2020%*Increase
(decrease)
%**
Research and development$536,666 14.8$529,888 15.0$6,778 1.3
Selling and marketing452,214 12.5416,425 11.835,789 8.6
General and administrative181,874 5.0169,548 4.812,326 7.3
Significant asset impairments and restructuring costs29,565 0.822,652 0.66,913 30.5
Amortization of intangible assets23,732 0.723,383 0.7349 1.5
Acquisition and integration costs2,572 0.14,031 0.1(1,459)(36.2)
Total operating expenses$1,226,623 33.9$1,165,927 33.0$60,696 5.2
_________________________________
*Denotes % of total revenue
**Denotes % change from 2020 to 2021
Research and development expense was adversely affected by $6.7 million as a result of foreign exchange rates, net of hedging, primarily due to the weakening of the U.S. Dollar in relation to the Canadian Dollar. Including the effect of foreign exchange rates, research and development expense increased by $6.8 million. This increase primarily reflects an increase in employee and compensation costs associated with higher headcount, and our annual cash incentive compensation plan, partially offset by $29.5 million received from the CEWS program and a decrease in professional services.
Selling and marketing expense was adversely affected by $6.8 million as a result of foreign exchange rates, primarily due to the weakening of the U.S. Dollar in relation to the Canadian Dollar and Euro. Including the effect of foreign exchange rates, sales and marketing expense increased by $35.8 million. This increase primarily reflects an increase in employee and compensation costs associated with higher sales commissions, partially offset by decreases in travel and entertainment costs as a result of COVID-19.
54

General and administrative expense was adversely affected by $1.6 million as a result of foreign exchange rates, primarily due to the weakening of the U.S. Dollar in relation to the Canadian Dollar and Euro. Including the effect of foreign exchange rates, general and administrative expense increased by $12.3 million. This increase primarily reflects an increase in employee and compensation costs associated with our annual cash incentive compensation plan and legal fees, partially offset by reduced bad debt expense.
Significant asset impairments and restructuring costs reflect actions that we have taken to redesign certain business processes and align our global workforce and facilities as part of a business optimization strategy to improve gross margin and constrain operating expense.
Amortization of intangible assets remained relatively unchanged.
Acquisition and integration costs primarily reflect acquisition compensation associated with a three-year earn-out arrangement related to the acquisition of DonRiver in fiscal 2018 and other fees related to the acquisition of Centina in fiscal 2020.
Other Items
The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):
 Fiscal Year  
2021%*2020%*Increase
(decrease)
%**
Interest and other income (loss), net$(1,768)$964 $(2,732)(283.4)
Interest expense$30,837 0.9$31,321 0.9$(484)(1.5)
Loss on extinguishment/modification of debt$— $(646)$(646)100.0
Provision (benefit) for income taxes$(37,445)(1.0)$94,670 2.7$(132,115)(139.6)
_________________________________
*Denotes % of total revenue
**Denotes % change from 2020 to 2021
Interest and other income (loss), net decreased, primarily reflecting lower interest income due to reduced interest rates on our investments, partially offset by the impact of foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity.
Interest expense remained relatively unchanged.
Loss on extinguishment and modification of debt reflects the refinance of our 2025 Term Loan. See Note 19 to our Consolidated Financial Statements in Item 8 of Part II of this report.
Provision (benefit) for income taxes decreased, primarily due to the $119.3 million tax benefit associated with recording a deferred tax asset for fiscal 2021. The effective tax rate for fiscal 2021 was lower as compared to fiscal 2020, primarily due to the tax benefit associated with recording a deferred tax asset. For further discussion, see Note 23 to our Consolidated Financial Statements included in Item 8 of Part II of this report.

Segment Profit (Loss)

The table below sets forth the changes in our segment profit (loss) for the respective periods (in thousands, except percentage data):
 Fiscal Year 
20212020Increase
(decrease)
%*
Segment profit (loss):    
Networking Platforms$850,901 $827,105 $23,796 2.9
Platform Software and Services$136,602 $105,609 $30,993 29.3
Blue Planet Automation Software and Services$(711)$(12,446)$11,735 (94.3)
Global Services$198,521 $