UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)



☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~May 2, 2020~~January 30, 2021



☐			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~~Corporation

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

7035 Ridge Road,, Hanover,, MD

(Address of principal executive offices)

23-2725311

(IRS Employer Identification No.)

21076

(Zip Code)

(~~410~~) (410) 694-5700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	CIEN	New York Stock Exchange

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 ☑ No ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

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 filer

☑

Accelerated 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. ☐

Indicate by check mark whether the registrant is a shell company (as determined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:



Class						Outstanding at ~~June~~March 5, ~~2020~~2021
common stock, $0.01 par value						~~153,644,375~~155,003,312

CIENA CORPORATION

INDEX

FORM 10-Q



			PAGE NUMBER
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)			3
Condensed Consolidated Statements of Operations for the Quarters Ended January 30, 2021 and ~~Six Months Ended May 2,~~February 1, 2020 ~~and May 4, 2019~~			3
Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended January 30, 2021 and ~~Six Months Ended May 2,~~February 1, 2020 ~~and May 4, 2019~~			4
Condensed Consolidated Balance Sheets at ~~May 2,~~January 30, 2021 and October 31, 2020 ~~and November 2, 2019~~			5
Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~May 2,~~January 30, 2021 and February 1, 2020 ~~and May 4, 2019~~			6
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the ~~Six~~Three Months Ended ~~May 2,~~January 30, 2021 and February 1, 2020 ~~and May 4, 2019~~			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2824
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4734
Item 4. Controls and Procedures			4734
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			4736
Item 1A. Risk Factors			4736
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5536
Item 3. Defaults Upon Senior Securities			5537
Item 4. Mine Safety Disclosures			5537
Item 5. Other Information			5537
Item 6. Exhibits			5638
Signatures			5739

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Quarter Ended
	January 30,		February 1,
	2021		2020
Revenue:
Products	$	597,220	$	687,215
Services	159,910		145,697
Total revenue	757,130		832,912
Cost of goods sold:
Products	315,098		389,013
Services	84,141		73,364
Total cost of goods sold	399,239		462,377
Gross profit	357,891		370,535
Operating expenses:
Research and development	132,741		130,900
Selling and marketing	97,278		107,066
General and administrative	39,993		42,468
Amortization of intangible assets	5,910		5,853
Significant asset impairments and restructuring costs	5,867		4,472
Acquisition and integration costs	307		1,819

Total operating expenses	282,096		292,578
Income from operations	75,795		77,957
Interest and other income (loss), net	(1,121)		3,646
Interest expense	(7,360)		(8,815)
Loss on extinguishment and modification of debt	0		(646)
Income before income taxes	67,314		72,142
Provision for income taxes	11,966		9,814
Net income	$	55,348	$	62,328
Basic net income per common share	$	0.36	$	0.40
Diluted net income per potential common share	$	0.35	$	0.40
Weighted average basic common shares outstanding	155,174		154,334
Weighted average dilutive potential common shares outstanding	156,583		155,738

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Revenue:
Products $ 739,892
$ 710,688
$ 1,427,107
$ 1,353,220
Services 154,161
154,323
299,858
290,318
Total revenue 894,053
865,011
1,726,965
1,643,538
Cost of goods sold:
Products 405,138
411,050
794,151
791,492
Services 75,589
79,284
148,953
154,028
Total cost of goods sold 480,727
490,334
943,104
945,520
Gross profit 413,326
374,677
783,861
698,018
Operating expenses:
Research and development 131,530
137,969
262,430
266,602
Selling and marketing 101,214
103,502
208,280
201,615
General and administrative 42,030
42,154
84,498
81,397
Amortization of intangible assets 5,839
5,529
11,692
11,057
Significant asset impairments and restructuring costs 3,811
4,068
8,283
6,341
Acquisition and integration costs 1,414
1,135
3,233
2,743
Total operating expenses 285,838
294,357
578,416
569,755
Income from operations 127,488
80,320
205,445
128,263
Interest and other income (loss), net (2,665 ) (244 ) 981
4,009
Interest expense (7,860 ) (9,471 ) (16,675 ) (18,912 )
Loss on extinguishment and modification of debt —
—
(646 ) —
Income before income taxes 116,963
70,605
189,105
113,360
Provision for income taxes 25,308
17,867
35,122
27,006
Net income $ 91,655
$ 52,738
$ 153,983
$ 86,354
Basic net income per common share $ 0.60
$ 0.34
$ 1.00
$ 0.55
Diluted net income per potential common share $ 0.59
$ 0.33
$ 0.99
$ 0.55
Weighted average basic common shares outstanding 153,858
156,170
154,099
156,244
Weighted average dilutive potential common shares outstanding 155,141
158,289
155,443
158,211

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME GAIN (LOSS)

(in thousands)

(unaudited)


	Quarter Ended
	January 30,		February 1,
	2021		2020
Net income	$	55,348	$	62,328
Change in unrealized loss on available-for-sale securities, net of tax	(49)		(86)
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax	6,617		(1,079)
Change in unrealized gain (loss) on forward starting interest rate swaps, net of tax	1,382		(1,480)
Change in cumulative translation adjustments	15,861		(2,982)
Other comprehensive gain (loss)	23,811		(5,627)
Total comprehensive income	$	79,159	$	56,701

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Net income $ 91,655
$ 52,738
$ 153,983
$ 86,354
Change in unrealized gain on available-for-sale securities, net of tax 396
112
310
413
Change in unrealized gain (loss) on foreign currency forward contracts, net of tax (6,940 ) (856 ) (8,019 ) 704
Change in unrealized loss on forward starting interest rate swaps, net of tax (8,623 ) (2,826 ) (10,103 ) (10,697 )
Change in cumulative translation adjustments (18,508 ) (4,996 ) (21,490 ) (3,846 )
Other comprehensive loss (33,675 ) (8,566 ) (39,302 ) (13,426 )
Total comprehensive income $ 57,980
$ 44,172
$ 114,681
$ 72,928

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)


	January 30, 2021		October 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,029,237	$	1,088,624
Short-term investments	151,434		150,667
Accounts receivable, net of allowance for credit losses of $11.1 million and $10.6 million as of January 30, 2021 and October 31, 2020, respectively.	700,025		719,405
Inventories, net	389,733		344,379
Prepaid expenses and other	326,110		308,084
Total current assets	2,596,539		2,611,159
Long-term investments	102,364		82,226
Equipment, building, furniture and fixtures, net	281,228		272,377
Operating right-of-use assets	54,244		57,026
Goodwill	311,294		310,847
Other intangible assets, net	91,516		96,647
Deferred tax asset, net	647,232		647,805
Other long-term assets	102,480		102,830
Total assets	$	4,186,897	$	4,180,917
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	247,241	$	291,904
Accrued liabilities and other short-term obligations	275,003		334,132
Deferred revenue	136,229		108,700
Operating lease liabilities	19,364		19,035
Current portion of long-term debt	6,930		6,930
Total current liabilities	684,767		760,701
Long-term deferred revenue	54,371		49,663
Other long-term obligations	128,764		123,185
Long-term operating lease liabilities	57,626		61,415
Long-term debt, net	674,856		676,356
Total liabilities	$	1,600,384	$	1,671,320
Commitments and contingencies (Note 20)	0		0
Stockholders’ equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; 0 shares issued and outstanding	0		0
Common stock – par value $0.01; 290,000,000 shares authorized; 155,187,945 and 154,563,005 shares issued and outstanding	1,552		1,546
Additional paid-in capital	6,826,488		6,826,531
Accumulated other comprehensive loss	(11,547)		(35,358)
Accumulated deficit	(4,229,980)		(4,283,122)
Total stockholders’ equity	2,586,513		2,509,597
Total liabilities and stockholders’ equity	$	4,186,897	$	4,180,917

May 2,
2020 November 2,
2019
ASSETS
Current assets:
Cash and cash equivalents $ 887,732
$ 904,045
Short-term investments 100,742
109,940
Accounts receivable, net of allowance for doubtful accounts of $10.4 million and $20.1 million as of May 2, 2020 and November 2, 2019, respectively. 693,963
724,854
Inventories, net 325,753
345,049
Prepaid expenses and other 332,021
297,914
Total current assets 2,340,211
2,381,802
Long-term investments —
10,014
Equipment, building, furniture and fixtures, net 260,867
286,884
Operating right-of-use assets 47,864
—
Goodwill 310,269
297,937
Other intangible assets, net 115,536
112,781
Deferred tax asset, net 689,416
714,942
Other long-term assets 92,599
88,986
Total assets $ 3,856,762
$ 3,893,346
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 292,164
$ 344,819
Accrued liabilities and other short-term obligations 288,773
382,740
Deferred revenue 107,023
111,381
Operating lease liabilities 18,096
—
Current portion of long-term debt 6,930
7,000
Total current liabilities 712,986
845,940
Long-term deferred revenue 42,894
45,492
Other long-term obligations 129,850
148,747
Long-term operating lease liabilities 51,100
—
Long-term debt, net 679,356
680,406
Total liabilities $ 1,616,186
$ 1,720,585
Commitments and contingencies (Note 21)

Stockholders’ equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding —
—
Common stock – par value $0.01; 290,000,000 shares authorized; 153,641,565
and 154,403,850 shares issued and outstanding 1,536
1,544
Additional paid-in capital 6,790,856
6,837,714
Accumulated other comprehensive loss (61,386 ) (22,084 )
Accumulated deficit (4,490,430 ) (4,644,413 )
Total stockholders’ equity 2,240,576
2,172,761
Total liabilities and stockholders’ equity $ 3,856,762
$ 3,893,346

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


								Three Months Ended
	Six Months Ended							January 30,		February 1,
	May 2,			May 4,				2021		2020
Cash flows provided by (used in) operating activities:							Cash flows provided by (used in) operating activities:
Net income							Net income	$	55,348	$	62,328
Adjustments to reconcile net income to net cash provided by (used in) operating activities:							Adjustments to reconcile net income to net cash provided by (used in) operating activities:
	2020			2019
Cash flows provided by operating activities:
Net income	$	153,983		$	86,354
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	48,381			42,995			Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	23,188		25,782
Share-based compensation costs	33,579			29,362			Share-based compensation costs	18,964		15,602
Amortization of intangible assets	19,361			17,778			Amortization of intangible assets	9,642		9,687
Deferred taxes	25,420			18,293			Deferred taxes	(905)		10,788
Provision for inventory excess and obsolescence	12,640			10,245			Provision for inventory excess and obsolescence	5,905		6,699
Provision for warranty	13,793			9,276			Provision for warranty	3,239		7,898
Other	16,190			(2,259		)	Other	4,277		4,540
Changes in assets and liabilities:							Changes in assets and liabilities:
Accounts receivable	15,865			43,174			Accounts receivable	18,862		64,938
Inventories	5,618			(109,554		)	Inventories	(51,020)		(4,481)
Prepaid expenses and other	(54,839		)	(33,241		)	Prepaid expenses and other	(13,835)		(29,792)
Operating lease right-of-use assets	8,642			—			Operating lease right-of-use assets	4,103		4,176
Accounts payable, accruals and other obligations	(151,713		)	(26,971		)	Accounts payable, accruals and other obligations	(112,170)		(142,229)
Deferred revenue	(5,679		)	4,560			Deferred revenue	31,917		8,926
Short and long-term operating lease liabilities	(10,311		)	—
Net cash provided by operating activities	130,930			90,012
Cash flows provided by (used in) investing activities:
Short- and long-term operating lease liabilities							Short- and long-term operating lease liabilities	(4,834)		(5,098)
Net cash provided by (used in) operating activities							Net cash provided by (used in) operating activities	(7,319)		39,764
Cash flows used in investing activities:							Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property	(45,458		)	(35,289		)	Payments for equipment, furniture, fixtures and intellectual property	(20,868)		(26,820)

Purchase of available for sale securities	(40,894		)	(97,897		)	Purchase of available for sale securities	(71,756)		(29,733)
Proceeds from maturities of available for sale securities	60,000			90,000			Proceeds from maturities of available for sale securities	51,266		30,000
Proceeds from sales of available for sale securities	—			98,263

Settlement of foreign currency forward contracts, net	(3,836		)	(2,741		)	Settlement of foreign currency forward contracts, net	2,357		(73)
Acquisition of business, net of cash acquired	(28,300		)	—			Acquisition of business, net of cash acquired	0		(28,300)
Purchase of equity investment	—			(2,667		)
Net cash provided by (used in) investing activities	(58,488		)	49,669
Proceeds from sale of equity investment							Proceeds from sale of equity investment	4,678		0

Net cash used in investing activities							Net cash used in investing activities	(34,323)		(54,926)
Cash flows used in financing activities:							Cash flows used in financing activities:

Payment of long-term debt	(1,733		)	(3,500		)	Payment of long-term debt	(1,732)		0

Payment of debt issuance costs	(382		)	—			Payment of debt issuance costs	0		(382)
Payment of finance lease obligations	(1,381		)	(1,679		)	Payment of finance lease obligations	(702)		(722)
Payment for debt conversion liability	—			(111,268		)

Shares repurchased for tax withholdings on vesting of stock unit awards	(18,200		)	(15,865		)	Shares repurchased for tax withholdings on vesting of stock unit awards	(19,242)		(12,572)
Repurchases of common stock - repurchase program	(74,535		)	(65,103		)	Repurchases of common stock - repurchase program	(12,406)		(49,203)
Proceeds from issuance of common stock	12,290			11,235			Proceeds from issuance of common stock	13,447		11,862
Net cash used in financing activities	(83,941		)	(186,180		)	Net cash used in financing activities	(20,635)		(51,017)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4,876		)	224			Effect of exchange rate changes on cash, cash equivalents and restricted cash	2,879		(643)
Net decrease in cash, cash equivalents and restricted cash	(16,375		)	(46,275		)	Net decrease in cash, cash equivalents and restricted cash	(59,398)		(66,822)
Cash, cash equivalents and restricted cash at beginning of period	904,161			745,423			Cash, cash equivalents and restricted cash at beginning of period	1,088,708		904,161
Cash, cash equivalents and restricted cash at end of period	$	887,786		$	699,148		Cash, cash equivalents and restricted cash at end of period	$	1,029,310	$	837,339
Supplemental disclosure of cash flow information							Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	17,590		$	19,978		Cash paid during the period for interest	$	7,566	$	9,325
Cash paid during the period for income taxes, net	$	22,011		$	9,258		Cash paid during the period for income taxes, net	$	8,798	$	8,325
Operating lease payments	$	11,409		$	—		Operating lease payments	$	5,387	$	5,642
Non-cash investing and financing activities							Non-cash investing and financing activities
Purchase of equipment in accounts payable	$	4,480		$	2,793		Purchase of equipment in accounts payable	$	5,935	$	5,905

Repurchase of common stock in accrued liabilities from repurchase program	$	—		$	1,441		Repurchase of common stock in accrued liabilities from repurchase program	$	800	$	1,501
Conversion of debt conversion liability into 1,585,140 shares of common stock	$	—		$	52,944

Operating lease right-of-use assets subject to lease liability	$	4,887		$	—		Operating lease right-of-use assets subject to lease liability	$	555	$	1,157

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


	Common Stock Shares	Par Value		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balance at October 31, 2020	154,563,005	$	1,546	$	6,826,531	$	(35,358)	$	(4,283,122)	$	2,509,597

Net income	—	—		—		—		55,348		55,348
Other comprehensive income	—	—		—		23,811		—		23,811
Repurchase of common stock - repurchase program	(251,578)	(3)		(13,203)		—		—		(13,206)
Issuance of shares from employee equity plans	1,252,120	12		13,435		—		—		13,447
Share-based compensation expense	—	—		18,964		—		—		18,964
Shares repurchased for tax withholdings on vesting of stock unit awards	(375,602)	(3)		(19,239)		—		—		(19,242)
Effect of adoption of new accounting standard (Note 2)	—	—		—		—		(2,206)		(2,206)
Balance at January 30, 2021	155,187,945	$	1,552	$	6,826,488	$	(11,547)	$	(4,229,980)	$	2,586,513


	Common Stock Shares		Par Value			Additional Paid-in-Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity				Common Stock Shares	Par Value		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balance at November 2, 2019	154,403,850		$	1,544		$	6,837,714		$	(22,084	)	$	(4,644,413	)	$	2,172,761		Balance at November 2, 2019	154,403,850	$	1,544	$	6,837,714	$	(22,084)	$	(4,644,413)	$	2,172,761
Net income	—		—			—			—			153,983			153,983			Net income	—	—		—		—		62,328		62,328
Other comprehensive loss	—		—			—			(39,302		)	—			(39,302		)	Other comprehensive loss	—	—		—		(5,627)		—		(5,627)
Repurchase of common stock - repurchase program	(1,872,446	)	(19		)	(74,516		)	—			—			(74,535		)	Repurchase of common stock - repurchase program	(1,288,111)	(13)		(50,691)		—		—		(50,704)
Issuance of shares from employee equity plans	1,562,899		16			12,274			—			—			12,290			Issuance of shares from employee equity plans	1,128,096	11		11,851		—		—		11,862
Share-based compensation expense	—		—			33,579			—			—			33,579			Share-based compensation expense	—	—		15,602		—		—		15,602
Shares repurchased for tax withholdings on vesting of stock unit awards	(452,738	)	(5		)	(18,195		)	—			—			(18,200		)	Shares repurchased for tax withholdings on vesting of stock unit awards	(297,002)	(3)		(12,569)		—		—		(12,572)
Balance at May 2, 2020	153,641,565		$	1,536		$	6,790,856		$	(61,386	)	$	(4,490,430	)	$	2,240,576

Balance at February 1, 2020																		Balance at February 1, 2020	153,946,833	$	1,539	$	6,801,907	$	(27,711)	$	(4,582,085)	$	2,193,650

Common Stock
Shares Par Value Additional
Paid-in-Capital Accumulated Other
Comprehensive
Loss Accumulated
Deficit Total
Stockholders’
Equity
Balance at November 3, 2018 154,318,531
$ 1,543
$ 6,881,223
$ (5,780 ) $ (4,947,652 ) $ 1,929,334
Effect of adoption of new accounting standards —
—
—
—
49,805
49,805
Net income —
—
—
—
86,354
86,354
Other comprehensive loss —
—
—
(13,426 ) —
(13,426 )
Repurchase of common stock - repurchase program (1,752,525 ) (17 ) (66,527 ) —
—
(66,544 )
Issuance of shares from employee equity plans 1,875,159
19
11,216
—
—
11,235
Share-based compensation expense —
—
29,362
—
—
29,362
Settlement of debt conversion liability 1,585,140
16
52,928
—
—
52,944
Shares repurchased for tax withholdings on vesting of stock unit awards (459,604 ) (5 ) (15,860 ) —
—
(15,865 )
Balance at May 4, 2019 155,566,701
$ 1,556
$ 6,892,342
$ (19,206 ) $ (4,811,493 ) $ 2,063,199

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

CIENA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


~~(1)~~	~~INTERIM FINANCIAL STATEMENTS~~

(1) INTERIM FINANCIAL STATEMENTS

The interim financial statements included herein for Ciena Corporation and its wholly owned subsidiaries (“Ciena”) have been prepared by Ciena, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).

The preparation of financial statements and related disclosures in conformity with ~~GAAP~~accounting principles generally accepted in the United States of America (“GAAP”) requires Ciena to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The inputs into certain of Ciena’s judgments, assumptions, and estimates ~~reflected~~reflect, among other things, the information available to Ciena regarding the economic implications of the COVID-19 pandemic, and expectations as to its impact on Ciena’s business. ~~The actual~~Among other things, these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results ~~that Ciena experiences~~ may differ materially from ~~such inputs into~~these estimates under different assumptions or conditions. To the extent that there are material differences between Ciena’s ~~critical~~estimates and ~~significant accounting estimates. As~~actual results, Ciena’s consolidated financial statements will be affected. In addition, including because the duration and severity of ~~the~~ COVID-19 pandemic are ~~unclear,~~uncertain, certain of such estimates could require further judgment or modification and therefore carry a higher degree of variability and ~~volatility as compared to prior periods.~~volatility. As events continue to evolve, Ciena’s estimates may change materially in future periods.

In the opinion of management, the financial statements included in this report reflect all normal recurring adjustments that Ciena considers necessary for the fair statement of the results of operations of Ciena for the interim periods covered and of the financial position of Ciena at the date of the interim balance sheets. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with ~~accounting principles generally accepted in the United States of America (“GAAP”)~~GAAP have been condensed or omitted pursuant to SEC rules and regulations. The Condensed Consolidated Balance Sheet as of ~~November 2, 2019~~October 31, 2020 was derived from audited financial statements, but does not include all disclosures required by GAAP. However, Ciena believes that the disclosures are adequate to understand the information presented herein. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with Ciena’s audited consolidated financial statements and the notes thereto included in Ciena’s annual report on Form 10-K for fiscal ~~2019~~2020 (the ~~“2019~~“2020 Annual Report”).

Ciena has a 52 or 53-week fiscal year, with quarters ending on the Saturday nearest to the last day of January, April, July and October, respectively, of each year. Fiscal ~~2020~~2021 and ~~2019~~2020 are 52-week fiscal years. Effective the second quarter of fiscal 2020, Ciena changed the presentation of reporting for its financial statements and notes thereto to reflect the actual dates on which fiscal years and quarterly periods ended. Because these dates can change from period to period, for consistency purposes, Ciena previously presented such information indicating that its quarters ended on January 31, April 30, July 31 and October 31. This change, affecting only the presentation of such information, was made on a prospective basis and it does not impact comparability of previous financial results. References to prior reported periods have been changed to reflect the actual period end dates of May 2, 2020, May 4, 2019, November 2, 2019 and November 3, 2018 for periods reported herein.


~~(2)~~	~~SIGNIFICANT ACCOUNTING POLICIES~~

(2) SIGNIFICANT ACCOUNTING POLICIES

Except for the changes in certain policies described below, there have been no material changes to Ciena’s significant accounting policies, compared to the accounting policies described in Note 1, Ciena Corporation and Significant Accounting Policies and Estimates, in Notes to Consolidated Financial Statements in Item 8 of Part II of the ~~2019~~2020 Annual Report.

Newly Issued Accounting Standards - Effective

~~Leases~~

In ~~February~~June 2016, the Financial Accounting Standards Board (“(”FASB”) issued Accounting Standards ~~Codification ASC 842, Leases, which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and to provide additional disclosures.~~ Effective November 3, 2019, Ciena adopted ASC 842 which requires right-of-use ("ROU") assets and lease liabilities to be recorded on the balance sheet for leases. The guidance specifies that at the inception of a contract, an entity must determine whether the contract is or contains a lease. The contract is or contains a lease if the contract conveys the right to control the use of the property, plant, or equipment for a designated term in exchange for consideration. Ciena’s evaluation of its contracts followed the assessment of whether there was a right to obtain substantially all of the economic benefits from the use and the right to direct the use of the identified asset in the contract. Operating leases are included in the Operating right-of-use assets (“Operating ROU assets”), Operating lease liabilities and Long-term operating lease liabilities in the Condensed Consolidated Balance Sheets. Finance leases are included in Equipment, building, furniture and fixtures, net (“Finance ROU assets”), Accrued liabilities and other short-term obligations and Other long-term obligations are included in the Condensed Consolidated Balance Sheets.

Ciena adopted the guidance on a modified retrospective basis as of November 3, 2019, such that related amounts in prior periods have not been restated. Ciena has operating and finance leases that primarily relate to real property. As a practical expedient, Ciena has elected the “package of practical expedients” and, as a result, did not reassess existing lease identifications, lease classifications or initial direct costs. As a practical expedient, Ciena has elected not to capitalize leases with a term of 12 months or less without a purchase option that it is likely to exercise. Also as a practical expedient for disclosure, Ciena has elected not to separate lease and non-lease components on operating and finance leases. Lease components are payment items directly attributable to the use of the underlying asset, while non-lease components are explicit elements of a contract not directly related to the use of the underlying asset, including pass through operating expenses like common area maintenance and utilities.

Operating ROU assets and lease liabilities and Finance ROU assets and lease liabilities are recognized on the Condensed Consolidated Balance Sheets at the present value of the future lease payments over the life of the lease term. Ciena uses discount rates based on incremental borrowing rates, on a collateralized basis, for the respective underlying assets, for terms similar to the respective leases when implicit rates for leases are not determinable. Operating lease costs are included as rent expense in the Condensed Consolidated Statements of Operations. Fixed base payments on operating leases paid directly to the lessor are recorded as lease expense on a straight-line basis. Related variable payments based on usage, changes in an index, or market rate are expensed as incurred. Finance ROU assets are generally amortized on a straight line basis over the lease term with the interest expense on the lease liability recorded using the interest method. The amortization and interest expense are recorded separately in the Condensed Consolidated Statements of Operations.

Upon adoption, Ciena recorded Operating ROU assets of $53.3 million and lease liabilities of $76.0 million related to its operating leases. As of November 2, 2019, the restructuring reserve liability for vacated office space of $11.1 million was included in Accrued liabilities and other short-term obligations and Other long-term obligations on the Condensed Consolidated Balance Sheet under prior accounting guidance. Upon adoption of the updated guidance, the existing lease reserve liability was reclassified as a reduction to the Operating ROU assets. ROU assets will be tested for impairment when circumstances indicate that the carrying values may not be recoverable. The adoption of this guidance did not require a cumulative effect adjustment or have an impact on the Condensed Consolidated Statements of Income or Condensed Consolidated Statements of Cash Flows.

~~Opening Balance Adjustments~~

~~The following table summarizes the cumulative effect of the changes made to Ciena’s Condensed Consolidated Balance Sheet in connection with the adoption of ASC 842 (in thousands):~~

Balance at
November 2, 2019
New Lease Accounting Standard Adjusted Balance at November 3, 2019
ASSETS:
Operating right-of-use assets $ —
$ 53,334
⁽¹⁾
$ 53,334

Total assets $ 3,893,346
$ 53,334
$ 3,946,680

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Accrued liabilities and other short-term obligations $ 382,740
$ (1,484 )
⁽²⁾
$ 381,256
Short-term lease liabilities $ —
20,498
⁽³⁾
$ 20,498
Other long-term obligations $ 148,747
(21,244 )
⁽⁴⁾
$ 127,503
Long-term operating lease liabilities $ —
55,564
⁽⁵⁾
$ 55,564

Total liabilities and stockholders’ equity $ 3,893,346
$ 53,334
$ 3,946,680

⁽¹⁾Represents $76.0 million of operating leases recognized as Operating ROU assets upon adoption of ASC 842, less $5.4 million of deferred rent, $6.2 million of tenant improvement allowances, $1.5 million of short-term restructuring reserve liability and $9.6 million of long-term restructuring reserve liability all recognized as a reduction to Right-of-use assets.

⁽²⁾~~Represents $1.5 million of short-term restructuring reserve liability recognized as a reduction to Operating ROU assets.~~

⁽³⁾~~Represents $20.5 million of lease liabilities for operating leases.~~

⁽⁴⁾~~Represents $9.6 million of long-term restructuring reserve liability, $5.4 million of deferred rent, and $6.2 million of tenant improvement allowances recognized as a reduction to Right-of-use assets.~~

⁽⁵⁾~~Represents $55.6 million of lease liabilities for operating leases.~~

~~See Note 15 for additional information.~~

~~Fair Value Measurement~~

~~In August 2018, the FASB issued ASU No. 2018-13 (“ASU 2018-13”~~), ~~Fair Value Measurement (Topic 820): Disclosure Framework~~ which modifies the disclosure requirements on fair value measurements. Ciena adopted ASU 2018-13 beginning the first quarter of fiscal year 2020. Adoption of ASU 2018-13 did not have a material effect on Ciena’s financial position or results of operations.

~~Newly Issued Accounting Standards - Not Yet Effective~~

~~In June 2016, the FASB issued ASU~~Update No. 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses, which requires measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Ciena adopted ASU 2016-13 ~~is effective for Ciena beginning~~on a modified retrospective basis in the first quarter of fiscal year 2021 through a cumulative-effect adjustment at the beginning of the period of adoption and ~~early adoption~~did not restate prior periods. The standard primarily impacts the value of Ciena’s accounts receivable, net and contract assets, net. Adoption of ASU 2016-13 did not have a material effect on Ciena’s financial position or results of operations.

Ciena’s significant accounting policies updated as a result of adopting this standard are as follows:

Allowance for Credit Losses for Accounts Receivable and Contract Assets

Ciena estimates its allowances for credit losses using relevant available information from internal and external sources, related to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. When assessing for credit losses, Ciena determines collectability by pooling assets with similar characteristics. The allowances for credit losses are each measured on a collective basis when similar risk characteristics exist. The allowances for credit losses are each measured by multiplying the exposure probability of default, the

probability the asset will default within a given time frame, by the loss given default rate, the percentage of the asset not expected to be collected due to default, based on the pool of assets.

Probability of default rates are published by third-party credit rating agencies. Adjustments to Ciena’s exposure probability may take into account including, but not limited to, various customer-specific factors, the potential sovereign risk of the geographic locations in which the customer is ~~permitted.~~operating and macroeconomic conditions. These factors are updated regularly or when facts and circumstances indicate that an update is deemed necessary.

Newly Issued Accounting Standards - Not Yet Effective

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides temporary optional guidance on contract modifications and hedging accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance, and Ciena is allowed to elect to apply the amendments prospectively through December 31, 2022. Ciena is currently evaluating the impact of this accounting standard update on its ~~Consolidated Financial Statements~~consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12 (“ASU 2019-12”), Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for Ciena beginning in the first quarter of fiscal year 2022, and early adoption is permitted. Most amendments within this standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. Ciena is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.


~~(3)~~	~~REVENUE~~

(3)REVENUE

Disaggregation of Revenue

Ciena’s disaggregated revenue represents similar groups that depict the nature, amount, and timing of revenue and cash flows for Ciena’s various offerings. The sales cycle, contractual obligations, customer requirements, and go-to-market strategies may differ for each of its product ~~categories,~~lines, resulting in different economic risk profiles for each ~~category.~~line. Effective as of the beginning of fiscal 2021, Ciena renamed its “Packet Networking” product line to “Routing and Switching.” This change, affecting only the presentation of such information, was made on a prospective basis and does not impact comparability of previous financial results. References to prior reported “Packet Networking” product line have been changed to“Routing and Switching” for this product line reported herein.

The tables below ~~(in thousands)~~ set forth Ciena’s disaggregated revenue for the respective ~~period:~~period (in thousands):


	Quarter Ended May 2, 2020											Quarter Ended January 30, 2021
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total			Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:											Product lines:
Converged Packet Optical	$	654,294	$	—	$	—	$	—	$	654,294	Converged Packet Optical	$	512,324	$	0	$	0	$	0	$	512,324
Packet Networking	64,167		—		—		—		64,167
Routing and Switching											Routing and Switching	64,307		0		0		0		64,307
Platform Software and Services	—		44,985		—		—		44,985		Platform Software and Services	0		49,839		0		0		49,839
Blue Planet Automation Software and Services	—		—		15,017		—		15,017		Blue Planet Automation Software and Services	0		0		16,934		0		16,934
Maintenance Support and Training	—		—		—		71,479		71,479		Maintenance Support and Training	0		0		0		67,630		67,630
Installation and Deployment	—		—		—		34,242		34,242		Installation and Deployment	0		0		0		39,611		39,611
Consulting and Network Design	—		—		—		9,869		9,869		Consulting and Network Design	0		0		0		6,485		6,485
Total revenue by product line	$	718,461	$	44,985	$	15,017	$	115,590	$	894,053	Total revenue by product line	$	576,631	$	49,839	$	16,934	$	113,726	$	757,130

Timing of revenue recognition:											Timing of revenue recognition:
Products and services at a point in time	$	718,461	$	16,978	$	4,745	$	4,677	$	744,861	Products and services at a point in time	$	576,631	$	16,062	$	5,173	$	1,857	$	599,723
Services transferred over time	—		28,007		10,272		110,913		149,192		Services transferred over time	0		33,777		11,761		111,869		157,407
Total revenue by timing of revenue recognition	$	718,461	$	44,985	$	15,017	$	115,590	$	894,053	Total revenue by timing of revenue recognition	$	576,631	$	49,839	$	16,934	$	113,726	$	757,130


	Quarter Ended February 1, 2020
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	591,549	$	0	$	0	$	0	$	591,549
Routing and Switching	67,508		0		0		0		67,508
Platform Software and Services	0		51,888		0		0		51,888
Blue Planet Automation Software and Services	0		0		15,466		0		15,466
Maintenance Support and Training	0		0		0		61,793		61,793
Installation and Deployment	0		0		0		34,954		34,954
Consulting and Network Design	0		0		0		9,754		9,754
Total revenue by product line	$	659,057	$	51,888	$	15,466	$	106,501	$	832,912

Timing of revenue recognition:
Products and services at a point in time	$	659,057	$	13,114	$	3,736	$	4,197	$	680,104
Services transferred over time	0		38,774		11,730		102,304		152,808
Total revenue by timing of revenue recognition	$	659,057	$	51,888	$	15,466	$	106,501	$	832,912

Quarter Ended May 4, 2019
Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total
Product lines:
Converged Packet Optical $ 623,838
$ —
$ —
$ —
$ 623,838
Packet Networking 73,138
—
—
—
73,138
Platform Software and Services —
35,229
—
—
35,229
Blue Planet Automation Software and Services —
—
12,473
—
12,473
Maintenance Support and Training —
—
—
68,788
68,788
Installation and Deployment —
—
—
41,322
41,322
Consulting and Network Design —
—
—
10,223
10,223
Total revenue by product line $ 696,976
$ 35,229
$ 12,473
$ 120,333
$ 865,011

Timing of revenue recognition:
Products and services at a point in time $ 696,976
$ 11,101
$ 3,047
$ 5,575
$ 716,699
Services transferred over time —
24,128
9,426
114,758
148,312
Total revenue by timing of revenue recognition $ 696,976
$ 35,229
$ 12,473
$ 120,333
$ 865,011

Six Months Ended May 2, 2020
Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total
Product lines:
Converged Packet Optical 1,245,844
$ —
$ —
$ —
$ 1,245,844
Packet Networking 131,675
—
—
—
131,675
Platform Software and Services —
96,873
—
—
96,873
Blue Planet Automation Software and Services —
—
30,482
—
30,482
Maintenance Support and Training —
—
—
133,271
133,271
Installation and Deployment —
—
—
69,196
69,196
Consulting and Network Design —
—
—
19,624
19,624
Total revenue by product line $ 1,377,519
$ 96,873
$ 30,482
$ 222,091
$ 1,726,965

Timing of revenue recognition:
Products and services at a point in time $ 1,377,518
$ 30,092
$ 8,482
$ 8,874
$ 1,424,966
Services transferred over time —
66,781
22,001
213,217
301,999
Total revenue by timing of revenue recognition $ 1,377,518
$ 96,873
$ 30,483
$ 222,091
$ 1,726,965

Six Months Ended May 4, 2019
Networking Platforms Platform Software and Services Blue Planet Automation Software and Services Global Services Total
Product lines:
Converged Packet Optical $ 1,172,835
$ —
$ —
$ —
$ 1,172,835
Packet Networking 144,707
—
—
—
144,707
Platform Software and Services —
76,827
—
—
76,827
Blue Planet Automation Software and Services —
—
27,447
—
27,447
Maintenance Support and Training —
—
—
130,065
130,065
Installation and Deployment —
—
—
71,944
71,944
Consulting and Network Design —
—
—
19,713
19,713
Total revenue by product line $ 1,317,542
$ 76,827
$ 27,447
$ 221,722
$ 1,643,538

Timing of revenue recognition:
Products and services at a point in time $ 1,317,542
$ 27,145
$ 9,275
$ 9,141
$ 1,363,103
Services transferred over time —
49,682
18,172
212,581
280,435
Total revenue by timing of revenue recognition $ 1,317,542
$ 76,827
$ 27,447
$ 221,722
$ 1,643,538

Effective the beginning of fiscal 2020, Ciena’s Global Sales and Marketing organization combined its previous North America and Caribbean and Latin America (“CALA”) regions into a new “Americas” sales region. Accordingly, Ciena reflects its sales geographically around the following markets: (i) Americas; (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia Pacific, Japan and India (“APAC”). Americas includes activities in North America and South America. Within each geographic area, Ciena maintains specific teams or personnel that focus on a particular region, country, customer or market vertical. These teams include sales management, account salespersons and sales engineers, as well as services professionals and commercial management personnel. The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena’s delivery of products and performance of services.

For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Geographic distribution:
Americas $ 650,381
$ 615,492
$ 1,224,385
1,131,973
EMEA 141,431
114,993
271,396
244,183
APAC 102,241
134,526
231,184
267,382
Total revenue by geographic distribution $ 894,053
$ 865,011
$ 1,726,965
$ 1,643,538


	Quarter Ended
	January 30,		February 1,
	2021		2020
Geographic distribution:
Americas	$	496,611	$	574,004
EMEA	155,418		129,965
APAC	105,101		128,943
Total revenue by geographic distribution	$	757,130	$	832,912

Ciena’s revenue includes $439.4 million and $524.3 million of United States revenue for the first quarter of fiscal 2021 and 2020, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.

For the first quarter of fiscal 2021, there were no customers that accounted for at least 10% of Ciena’s revenue. The table below shows the customers that accounted for at least 10% of Ciena’s revenue for the first quarter of fiscal 2020: (in thousands):


	Quarter Ended
	January 30,	February 1,
	2021	2020
AT&T	n/a	$	84,010
Verizon	n/a	114,548

Total	n/a	$	198,558


•n/a			~~Networking Platforms~~ ~~reflects sales~~Denotes revenue representing less than 10% of ~~Ciena’s Converged Packet Optical and Packet Networking product lines~~.

•

~~Converged Packet Optical~~ - includes the 6500 Packet-Optical Platform, 5430 Reconfigurable Switching System, Waveserver® stackable interconnect system (“Waveserver”), the family of CoreDirector® Multiservice Optical Switches and the OTN configurationtotal revenue for the ~~5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform.~~period

•

The customers identified above for the first quarter of fiscal 2020 purchased products and services from each of Ciena’s operating segments.

•~~Packet~~ Networking Platforms revenue reflects sales of Ciena’s Converged Packet Optical and Routing and Switching product lines.

◦Converged Packet Optical - includes the 6500 Packet-Optical Platform, Waveserver® stackable interconnect system, the 6500 Reconfigurable Line System (RLS) and the 5400 family of Packet-Optical Platforms. This product line also includes sales of the Z-Series Packet-Optical Platform.

◦Routing and Switching - includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform, the Ethernet packet configuration for the 5410 Service Aggregation Switch, and the 6500 Packet Transport System (PTS), which combines packet switching, control plane operation, and integrated optics.

The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Operating system software and enhanced software features embedded in Ciena hardware are each considered distinct performance obligations for which the revenue is generally recognized upfront at a point in time upon transfer of control.

•Platform Software and Services provides analytics, data, and planning tools to assist customers in managing Ciena’s Networking Platforms products in their networks. Ciena’s platform software includes its Manage, Control and Plan (MCP) domain controller solution, OneControl Unified Management System, as well as planning tools and a number of legacy software solutions that support our installed base of network solutions. Platform software-related services revenue includes sales of subscription, installation, support, and consulting services related to Ciena’s software platforms, operating system software and enhanced software features embedded in each of the Networking Platforms product lines above. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

•Blue Planet® Automation Software and Services is a comprehensive, micro-services, standards-based open software suite, together with related services, that enables customers to implement large-scale software and IT-led operations support system (OSS) transformations by transforming legacy networks into “service ready” networks, accelerating the

creation, delivery and lifecycle management of new, cloud-based services. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), inventory management (BPI), route optimization and analysis (ROA), network function virtualization orchestration (NFVO), and unified assurance and analytics (UAA). Services revenue includes sales of subscription, installation, support, consulting and design services related to Ciena’s Blue Planet Automation Platform. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

•

~~Platform Software and Services~~ provides analytics, data, and planning tools to assist customers in managing Ciena’s Networking Platforms products in their networks. Ciena’s platform software includes its Manage, Control and Plan (MCP) domain controller solution, OneControl Unified Management System, ON-Center® Network and Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. Platform software-related services revenue includes sales of subscription, installation, support, and consulting services related to Ciena’s software platforms, operating system software and enhanced software features embedded in each of the Networking Platforms product lines above. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

•

~~Blue Planet® Automation Software and Services~~ is a comprehensive, open software suite, together with related services, that allows customers to use enhanced knowledge about their networks to drive adaptive optimization of their services and operations. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), analytics, network health predictor (NHP), route optimization and assurance (ROA), inventory management, unified assurance and analytics (UAA) and Ciena’s SDN Multilayer Controller and virtual wide area network (V-WAN) application. Services revenue includes sales of subscription, installation, support, consulting and design services related to Ciena’s Blue Planet Automation Platform. Revenue from the software portion of this segment is included in product revenue on the Condensed Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena’s software platform revenue typically reflects ~~sales of~~ either perpetual or term-based software licenses, and these sales are considered a distinct performance obligation where revenue is generally recognized upfront at a point in time upon transfer of control. Revenue from software subscription and support are recognized ratably over the period during which the services are performed. Revenue from professional services for solution customization, software and solution support services, consulting and design, and build-operate-transfer services relating to Ciena’s software offerings are recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period.

•

•Global Services revenue reflects sales of a broad range of Ciena’s services for maintenance support and training, installation and deployment, and consulting and network design activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statements of Operations.

Ciena’s Global Services are considered a distinct performance obligation where revenue is generally recognized over time. Revenue from maintenance support is recognized ratably over the period during which the services are performed. Revenue from installation and deployment services and consulting and network design services are recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period. Revenue from training services is generally recognized at a point in time upon completion of the service.

reflects sales of a broad range of Ciena’s services for maintenance support and training, installation and deployment, and consulting and network design activities. Revenue from this segment is included in services revenue on the Condensed Consolidated Statements of Operations. Ciena’s Global Services are considered a distinct performance obligation where revenue is generally recognized over time. Revenue from maintenance support is recognized ratably over the period during which the services are performed. Revenue from installation and deployment services and consulting and network design services are recognized over time with Ciena applying the input method to determine the amount of revenue to be recognized in a given period. Revenue from training services is generally recognized at a point in time upon completion of the service.

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities (deferred revenue) from contracts with customers (in thousands):


	Balance at January 30, 2021		Balance at October 31, 2020
Accounts receivable, net	$	700,025	$	719,405
Contract assets for unbilled accounts receivable, net	$	85,461	$	85,843
Deferred revenue	$	190,600	$	158,363

Balance at May 2, 2020 Balance at November 2, 2019
Accounts receivable, net $ 693,963
$ 724,854
Contract assets for unbilled accounts receivable $ 87,746
$ 84,046
Deferred revenue $ 149,917
$ 156,873

Our contract assets represent unbilled accounts receivable, net where transfer of a product or service has occurred but invoicing is conditional upon completion of future performance obligations. These amounts are primarily related to installation and deployment and professional services arrangements where transfer of control has occurred, but Ciena has not yet invoiced the customer. Contract assets are included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. See Note 10 below.

Contract liabilities consist of deferred revenue and represent advanced payments against non-cancelable customer orders received prior to revenue recognition. Ciena recognized approximately ~~$76.5~~$46.4 million and ~~$73.0~~$49.0 million of revenue during the first ~~six~~three months of fiscal ~~2020~~2021 and ~~2019~~2020 that was included in the deferred revenue balance at October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ respectively. Revenue recognized due to changes in transaction price from performance obligations satisfied or partially satisfied in previous periods was immaterial during the ~~six~~three months ended ~~May 2, 2020~~January 30, 2021 and ~~May 4, 2019.~~February 1, 2020.

Capitalized Contract Acquisition Costs

Capitalized contract acquisition costs consist of deferred sales commissions, ~~and~~ were ~~$13.3~~$15.7 million and ~~$15.7~~$15.3 million as of ~~May 2,~~January 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ respectively, and were included in ~~other current assets~~prepaid expenses and other and other long-term assets. The amortization expense associated with these costs was ~~$10.1~~$5.5 million and ~~$8.4~~$5.6 million during the first ~~six~~three months of fiscal ~~2020~~2021 and ~~2019,~~2020, respectively, and was included in sales and marketing expense.

Remaining Performance Obligations

Remaining Performance Obligations ~~(RPO)~~(“RPO”) are comprised of non-cancelable customer purchase orders for products and services that are awaiting transfer of control for revenue recognition under the applicable contract terms. As of ~~May 2, 2020,~~January 30, 2021, the aggregate amount of RPO was ~~$1.078~~$1.1 billion. As of ~~May 2, 2020,~~January 30, 2021, Ciena expects approximately ~~83%~~80% of the RPO to be recognized as revenue within the next twelve months.


~~(4)~~	~~BUSINESS COMBINATIONS~~

~~Centina Systems, Inc. Acquisition~~

On November 2, 2019 Ciena acquired Centina Systems, Inc. (“Centina”), a provider of service assurance analytics and network performance management solutions, for approximately $34.0 million in cash. This transaction has been accounted for as the acquisition of a business.

During the first six months of fiscal 2020, Ciena incurred approximately $0.7 million of acquisition-related costs associated with this transaction. These costs primarily reflect fees associated with financial, legal and accounting advisors.

~~The following table summarizes the final purchase price allocation related to the acquisition based on the estimated fair value of the acquired assets and assumed liabilities (in thousands):~~

Amount
Cash and cash equivalents $ 5,718
Accounts receivable 610
Prepaid expenses and other 536
Equipment, furniture and fixtures 17
Goodwill 13,055
Customer relationships and contracts 400
Developed technology 22,200
Accounts payable (47 )
Accrued liabilities (286 )
Deferred revenue (1,493 )
Deferred tax liability (6,692 )
Total purchase consideration $ 34,018

~~Customer relationships and contracts represent agreements with existing Centina customers and have an estimated useful life of two years.~~(4) RESTRUCTURING COSTS

Developed technology represents purchased technology that has reached technological feasibility and for which Centina had substantially completed development as of the date of acquisition. Fair value was determined using future discounted cash flows related to the projected income stream of the developed technology for a discrete projection period. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of five years.

The goodwill generated from the acquisition of Centina is primarily related to expected synergies. The total goodwill amount was recorded in the Blue Planet Automation Software and Services segment. The goodwill is not deductible for income tax purposes.

~~Pro forma disclosures have not been included due to immateriality.~~


~~(5)~~	~~RESTRUCTURING COSTS~~

Ciena has undertaken a number of restructuring activities intended to reduce expense and to better align its workforce and costs with market opportunities, product development and business strategies. The following table sets forth the restructuring activity and balance of the restructuring liability accounts, which are included in Accrued liabilities and other short-term obligations on Ciena’s Condensed Consolidated Balance Sheets, for the ~~six~~three months ended ~~May 2, 2020~~January 30, 2021 (in thousands):


	Workforce reduction			Consolidation of excess facilities and other restructuring activities			Total
Balance at October 31, 2020	$	2,915		$	0		$	2,915
Charges	1,990		(1)	3,877		(2)	5,867

Cash payments	(2,994)			(3,877)			(6,871)
Balance at January 30, 2021	$	1,911		$	0		$	1,911
Current restructuring liabilities	$	1,911		$	0		$	1,911

Workforce
reduction

Consolidation
of excess
facilities and other restructuring activities
Total
Balance at November 2, 2019 $ 3,983
$ 11,160
$ 15,143
Charges 4,426
⁽¹⁾
3,857
⁽²⁾
8,283
Adjustments related to ASC 842 —
(11,160 )
⁽³⁾
(11,160 )
Cash payments (5,982 ) (3,857 ) (9,839 )
Balance at May 2, 2020 $ 2,427
$ —
$ 2,427
Current restructuring liabilities $ 2,427
$ —
$ 2,427
Non-current restructuring liabilities $ —
$ —
$ —

⁽¹⁾Reflects a global workforce reduction of 8650 employees during the ~~six~~three months ended ~~May 2, 2020~~January 30, 2021 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

⁽²⁾Primarily represents ~~variable~~ costs and imputed interest expense related to restructured ~~facilities.~~facilities and the redesign of certain business processes.

⁽³⁾~~Represents restructuring reserve liability recognized as a reduction to Operating right-of-use assets, net in relation to adoption of ASC 842. See Notes 2 and~~ 15 ~~for further discussion.~~

The following table sets forth the restructuring activity and balance of the restructuring liability accounts, which are included in Accrued liabilities and other short-term obligations on Ciena’s Condensed Consolidated Balance Sheets for the ~~six~~three months ended ~~May 4, 2019~~February 1, 2020 (in thousands):

Workforce
reduction

Consolidation
of excess
facilities
Total
Balance at November 3, 2018 $ 2,108
$ 1,739
$ 3,847
Charges 5,661
⁽¹⁾
680
⁽²⁾
6,341
Cash payments (6,667 ) (847 ) (7,514 )
Balance at May 4, 2019 $ 1,102
$ 1,572
$ 2,674
Current restructuring liabilities $ 1,102
$ 347
$ 1,449
Non-current restructuring liabilities $ —
$ 1,225
$ 1,225


	Workforce reduction			Consolidation of excess facilities			Total
Balance at November 2, 2019	$	3,983		$	11,160		$	15,143
Charges	1,204		(1)	3,268		(2)	4,472

Adjustments related to ASC 842	0			(11,160)		(3)	(11,160)
Cash payments	(2,955)			(3,268)			(6,223)
Balance at February 1, 2020	$	2,232		$	0		$	2,232
Current restructuring liabilities	$	2,232		$	0		$	2,232

⁽¹⁾Reflects a global workforce reduction of approximately 9522 employees during the ~~six~~three months ended ~~May 4, 2019~~February 1, 2020 as part of a business optimization strategy to improve gross margin, constrain operating expense and redesign certain business processes.

⁽²⁾~~Reflects unfavorable lease commitments in connection with a portion of the facilities for certain locations in the United States~~Primarily represents variable costs and ~~India where Ciena has vacated unused space.~~imputed interest expense related to restructured facilities.

(3) Represents restructuring reserve liability recognized as a reduction to Operating right-of-use (“ROU”) assets, net in relation to adoption of ASC 842.


~~(6)~~	~~INTEREST AND OTHER INCOME (LOSS), NET~~

(5) INTEREST AND OTHER INCOME (LOSS), NET

The components of interest and other income (loss), net, are as follows (in thousands):


	Quarter Ended
	January 30,		February 1,
	2021		2020
Interest income	$	534	$	3,390

Gains on non-hedge designated foreign currency forward contracts	4,530		637
Foreign currency exchange losses	(6,918)		(771)

Other	733		390
Interest and other income (loss), net	$	(1,121)	$	3,646

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Interest income $ 2,023
$ 3,519
$ 5,413
$ 7,391
Gains (losses) on non-hedge designated foreign currency forward contracts 1,086
(898 ) 1,723
(877 )
Foreign currency exchange losses (4,067 ) (2,995 ) (4,839 ) (2,212 )
Other (1,707 ) 130
(1,316 ) (293 )
Interest and other income (loss), net $ (2,665 ) $ (244 ) $ 981
$ 4,009

Ciena Corporation, as the U.S. parent entity, uses the U.S. Dollar as its functional currency; however, some of its foreign branch offices and subsidiaries use local currencies as their functional currencies. Ciena recorded ~~$4.8~~$6.9 million and ~~$2.2~~$0.8 million in foreign currency exchange rate losses during the first ~~six~~three months of fiscal ~~2020~~2021 and ~~2019,~~2020, respectively, as a result of monetary assets and liabilities that were transacted in a currency other than the entity’s functional currency, and the related remeasurement adjustments were recorded in interest and other income (loss), net, on the Condensed Consolidated Statements of Operations. From time to time, Ciena uses foreign currency forwards to hedge this type of balance sheet exposure. ~~See Note 13 for further discussion.~~ These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income (loss), net, on the Condensed Consolidated Statements of Operations. During the first ~~six~~three months of fiscal 2021 and 2020, respectively, Ciena recorded gains of ~~$1.7~~$4.5 million ~~from non-hedge designated foreign currency forward contracts. During the first six months of fiscal 2019, Ciena recorded losses of $0.9~~and $0.6 million from non-hedge designated foreign currency forward contracts.


~~(7)~~	~~INCOME TAXES~~

(6) INCOME TAXES

On December 2, 2019, the U.S. Department of the Treasury released final regulations and proposed regulations under Section 59A of the Internal Revenue Code, the Base Erosion and Anti-Abuse Tax (“BEAT”). BEAT, which requires certain U.S. corporations to pay a minimum tax associated with deductible payments to non-U.S. related parties, was enacted as part of the Tax Cuts and Jobs Act (the “Tax Act”). Also, on December 2, 2019, the U.S. Department of the Treasury released final regulations that provide additional guidance with respect to the foreign tax credit regime under the Tax Act.

The effective tax rate for the ~~second quarter and six~~three months ended ~~May 2, 2020~~January 30, 2021 was ~~lower~~higher than the effective tax rate for the ~~second quarter and six~~three months ended ~~May 4, 2019,~~February 1, 2020, primarily due to ~~reduced~~the BEAT reduction in fiscal 2020 and the effect of the final regulations released on December 2, 2019.

Our future income tax provisions and deferred tax balances may be affected by the amount of pre-tax income, the jurisdictions where it is earned, the existence and utilizability of tax attributes and changes in tax laws and business reorganizations. Ciena continues to monitor these items and will adopt strategies to address their impact as appropriate.


~~(8)~~	~~SHORT-TERM AND LONG-TERM INVESTMENTS~~

(7) SHORT-TERM AND LONG-TERM INVESTMENTS

As of the dates indicated, investments are comprised of the following (in thousands):


	January 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	151,420	$	14	$	0	$	151,434
Included in long-term investments	102,360		4		0		102,364
	$	253,780	$	18	$	0	$	253,798

May 2, 2020
Amortized Cost
Gross Unrealized
Gains

Gross Unrealized
Losses

Estimated Fair
Value
U.S. government obligations:
Included in short-term investments $ 100,116
$ 626
$ —
$ 100,742
$ 100,116
$ 626
$ —
$ 100,742

November 2, 2019
Amortized Cost
Gross Unrealized
Gains

Gross Unrealized
Losses

Estimated Fair
Value
U.S. government obligations:
Included in short-term investments $ 109,715
$ 225
$ —
$ 109,940
Included in long-term investments 10,017
—
(3 ) 10,014
$ 119,732
$ 225
$ (3 ) $ 119,954


	October 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	150,559	$	109	$	(1)	$	150,667
Included in long-term investments	82,252		0		(26)		82,226
	$	232,811	$	109	$	(27)	$	232,893

The following table summarizes the final legal maturities of debt investments at ~~May 2, 2020~~January 30, 2021 (in thousands):


	Amortized Cost		Estimated Fair Value
Less than one year	$	151,420	$	151,434
Due in 1-2 years	102,360		102,364
	$	253,780	$	253,798

Amortized
Cost

Estimated
Fair Value
Less than one year $ 100,116
$ 100,742
$ 100,116
$ 100,742


~~(9)~~	~~FAIR VALUE MEASUREMENTS~~

(8) FAIR VALUE MEASUREMENTS

As of the date indicated, the following table summarizes the assets and liabilities that are recorded at fair value on a recurring basis (in thousands):


	January 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	810,289	$	0	$	0	$	810,289
Bond mutual fund	50,348		0		0		50,348
Time deposits	35,014		0		0		35,014
Deferred compensation plan assets	10,669		0		0		10,669
U.S. government obligations	0		253,798		0		253,798

Foreign currency forward contracts	0		8,397		0		8,397

Total assets measured at fair value	$	906,320	$	262,195	$	0	$	1,168,515

Liabilities:
Foreign currency forward contracts	$	0	$	417	$	0	$	417
Forward starting interest rate swaps	0		26,248		0		26,248

Total liabilities measured at fair value	$	0	$	26,665	$	0	$	26,665

May 2, 2020
Level 1 Level 2 Level 3 Total
Assets:
Money market funds $ 699,957
$ —
$ —
$ 699,957
Bond mutual fund 50,165
—
—
50,165
Deferred compensation plan assets 6,428
—
—
6,428
U.S. government obligations —
100,742
—
100,742
Foreign currency forward contracts —
345
—
345
Total assets measured at fair value $ 756,550
$ 101,087
$ —
$ 857,637

Liabilities:
Foreign currency forward contracts $ —
$ 9,747
$ —
$ 9,747
Forward starting interest rate swaps —
32,665
—
32,665
Contingent consideration —
—
3,705
3,705
Total liabilities measured at fair value $ —

$ 42,412
$ 3,705
$ 46,117


	October 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	889,293	$	0	$	0	$	889,293
Bond mutual fund	50,361		0		0		50,361
Deferred compensation plan assets	8,213		0		0		8,213
U.S. government obligations	0		232,893		0		232,893

Foreign currency forward contracts	0		82		0		82

Total assets measured at fair value	$	947,867	$	232,975	$	0	$	1,180,842

Liabilities:
Foreign currency forward contracts	$	0	$	681	$	0	$	681

Forward starting interest rate swaps	0		28,513		0		28,513

Total liabilities measured at fair value	$	0	$	29,194	$	0	$	29,194

November 2, 2019
Level 1 Level 2 Level 3 Total
Assets:
Money market funds $ 759,114
$ —
$ —
$ 759,114
Deferred compensation plan assets 4,974
4,974
U.S. government obligations —
119,954
—
119,954
Foreign currency forward contracts —
1,570
—
1,570
Total assets measured at fair value $ 764,088
$ 121,524
$ —
$ 885,612

Liabilities:
Foreign currency forward contracts $ —
$ 35
$ —
$ 35
Forward starting interest rate swaps —
21,093
—
21,093
Contingent consideration —
—
3,705
3,705
Total liabilities measured at fair value $ —
$ 21,128
$ 3,705
$ 24,833

As of the date indicated, the assets and liabilities above are presented on Ciena’s Condensed Consolidated Balance Sheets as follows (in thousands):


	January 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	895,651	$	0	$	0	$	895,651
Short-term investments	0		151,434		0		151,434
Prepaid expenses and other	0		8,397		0		8,397

Other long-term assets	10,669		102,364		0		113,033
Total assets measured at fair value	$	906,320	$	262,195	$	0	$	1,168,515

Liabilities:
Accrued liabilities and other short-term obligations	$	0	$	417	$	0	$	417
Other long-term obligations	0		26,248		0		26,248
Total liabilities measured at fair value	$	0	$	26,665	$	0	$	26,665


	October 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	939,654	$	0	$	0	$	939,654
Short-term investments	0		150,667		0		150,667
Prepaid expenses and other	0		82		0		82

Other long-term assets	8,213		82,226		0		90,439
Total assets measured at fair value	$	947,867	$	232,975	$	0	$	1,180,842

Liabilities:
Accrued liabilities and other short-term obligations	$	0	$	681	$	0	$	681

Other long-term obligations	0		28,513		0		28,513
Total liabilities measured at fair value	$	0	$	29,194	$	0	$	29,194

May 2, 2020
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents $ 750,122
$ —
$ —
$ 750,122
Short-term investments —
100,742
—
100,742
Prepaid expenses and other —
345
—
345
Other long-term assets 6,428
—
—
6,428
Total assets measured at fair value $ 756,550
$ 101,087
$ —
$ 857,637

Liabilities:
Accrued liabilities and other short-term obligations $ —
$ 9,747
$ 3,705
$ 13,452
Other long-term obligations —
32,665
—
32,665
Total liabilities measured at fair value $ —

$ 42,412
$ 3,705
$ 46,117

November 2, 2019
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents $ 759,114
$ —
$ —
$ 759,114
Short-term investments —
109,940
—
109,940
Prepaid expenses and other —
1,570
—
1,570
Long-term investments —
10,014
—
10,014
Other long-term assets 4,974
—
—
4,974
Total assets measured at fair value $ 764,088
$ 121,524
$ —
$ 885,612

Liabilities:
Accrued liabilities and other short-term obligations $ —
$ 35
$ —
$ 35
Other long-term obligations —
21,093
3,705
24,798
Total liabilities measured at fair value $ —
$ 21,128
$ 3,705
$ 24,833

Ciena did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

Ciena’s Level 3 liability includes $3.7 million in accrued liabilities and other short-term obligations as of May 2, 2020. This reflects a contingent consideration element of a three-year payout arrangement associated with Ciena’s purchase of DonRiver Holdings, LLC (“DonRiver”) in the fourth quarter of fiscal 2018. As of May 2, 2020, there was no material change to the fair value.

(9) INVENTORIES


~~(10)~~	~~INVENTORIES~~

As of the dates indicated, inventories are comprised of the following (in thousands):


	January 30, 2021		October 31, 2020
Raw materials	$	123,388	$	119,481
Work-in-process	11,353		13,738
Finished goods	257,048		210,050
Deferred cost of goods sold	38,920		40,747
Gross inventories	430,709		384,016
Provision for excess and obsolescence	(40,976)		(39,637)
Inventories, net	$	389,733	$	344,379

May 2,
2020 November 2,
2019
Raw materials $ 106,193
$ 99,041
Work-in-process 11,471
13,657
Finished goods 194,532
226,622
Deferred cost of goods sold 56,904
53,051
Gross inventories 369,100
392,371
Provision for excess and obsolescence (43,347 ) (47,322 )
Inventories, net $ 325,753
$ 345,049

Ciena writes down its inventory for estimated obsolescence or unmarketable inventory by an amount equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about future demand, which are affected by changes in Ciena’s strategic direction, discontinuance of a product or introduction of newer versions of products, declines in the sales of or forecasted demand for certain products, and general market conditions. During the first ~~six~~three months of fiscal ~~2020~~,2021, Ciena recorded a provision for excess and obsolescence of ~~$12.6~~$5.9 million, primarily related to a decrease in the forecasted demand for certain Networking Platforms products. Deductions from the provision for excess and obsolete inventory relate primarily to disposal activities.

(10) PREPAID EXPENSES AND OTHER


~~(11)~~	~~PREPAID EXPENSES AND OTHER~~

As of the dates indicated, prepaid expenses and other are comprised of the following (in thousands):


	January 30, 2021		October 31, 2020
Contract assets for unbilled accounts receivable, net	$	85,461	$	85,843
Prepaid expenses	76,462		70,647
Prepaid VAT and other taxes	73,767		72,838
Product demonstration equipment, net	44,707		44,793
Other non-trade receivables	26,099		21,981
Capitalized contract acquisition costs	10,712		11,296
Derivative assets	8,397		82
Deferred deployment expense	505		604

	$	326,110	$	308,084

May 2,
2020 November 2,
2019
Contract assets for unbilled accounts receivable $ 87,746
$ 84,046
Prepaid VAT and other taxes 78,275
84,706
Prepaid expenses 65,127
48,680
Other non-trade receivables 54,269
28,136
Product demonstration equipment, net 36,212
38,900
Capitalized contract acquisition costs 9,424
11,677
Deferred deployment expense 623
125
Derivative assets 345
1,570
Restricted cash —
74
$ 332,021
$ 297,914

Depreciation of product demonstration equipment was ~~$4.2 million and $4.3~~$2.6 million during the first ~~six~~three months of fiscal ~~2020~~2021 and ~~2019, respectively.~~$2.2 million during the first three months of fiscal 2020.

For further discussion on contract assets and capitalized contract acquisition costs, see Note 3 above.


~~(12)~~	~~OTHER BALANCE SHEET DETAILS~~

(11) OTHER BALANCE SHEET DETAILS

As of the dates indicated, accrued liabilities and other short-term obligations are comprised of the following (in thousands):


	January 30, 2021		October 31, 2020
Compensation, payroll related tax and benefits (1)	$	76,477	$	135,462
Warranty	48,184		49,868
Vacation	28,414		26,945



Finance lease obligations	3,011		2,836
Interest payable	605		672
Other	118,312		118,349
	$	275,003	$	334,132

May 2,
2020 November 2,
2019
Compensation, payroll related tax and benefits⁽¹⁾
$ 96,195
$ 182,363
Warranty 51,863
48,498
Vacation 23,363
22,290
Foreign currency forward contracts 9,747
35
Contingent consideration 3,705
4,372
Contingent compensation 3,420
—
Finance lease obligations 2,585
2,764
Interest payable 808
1,007
Other 97,087
121,411
$ 288,773
$ 382,740

⁽¹⁾ Reduction is primarily due to the timing of bonus payments to employees under Ciena’s annual cash incentive compensation plan.

The following table summarizes the activity in Ciena’s accrued warranty for the fiscal periods indicated (in thousands):


	Beginning Balance		Current Period Provisions	Settlements	Ending Balance
Three Months Ended February 1, 2020	$	48,498	7,898	(5,206)	$	51,190
Three Months Ended January 30, 2021	$	49,868	3,239	(4,923)	$	48,184

As of the dates indicated, deferred revenue is comprised of the following (in thousands):

Beginning Balance Current Period Provisions Settlements Ending Balance
Six Months Ended May 4, 2019 $ 44,740
9,276
(9,109 ) $ 44,907
Six Months Ended May 2, 2020 $ 48,498
13,793
(10,428 ) $ 51,863


	January 30, 2021		October 31, 2020
Products	$	15,374	$	17,534
Services	175,226		140,829
	190,600		158,363
Less current portion	(136,229)		(108,700)
Long-term deferred revenue	$	54,371	$	49,663

(12) DERIVATIVE INSTRUMENTS


~~(13)~~	~~DERIVATIVE INSTRUMENTS~~

Foreign Currency Derivatives

Ciena conducts business globally in numerous currencies, thus is exposed to adverse movements in foreign currency exchange rates. To limit the exposure related to foreign currency changes, Ciena enters into foreign currency contracts. Ciena does not enter into such contracts for speculative purposes.

As of ~~May 2,~~January 30, 2021 and October 31, 2020, ~~and~~ ~~November 2, 2019~~, Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce ~~the~~ variability ~~in its Canadian Dollar- and Indian Rupee-denominated expense, which~~ principally ~~relates~~related to research and development activities. The notional amount of these contracts was approximately ~~$162.9~~$248.3 million and ~~$197.4~~$254.9 million as of ~~May 2,~~January 30, 2021 and October 31, 2020, ~~and~~ ~~November 2, 2019~~, respectively. These foreign exchange contracts have maturities of 24 months or less and have been designated as cash flow hedges.

As of ~~May 2,~~January 30, 2021 and October 31, 2020, ~~and November 2, 2019,~~ Ciena had forward contracts to hedge its foreign exchange exposure in order to reduce the variability in various currencies of certain balance sheet items. The notional amount of these contracts was approximately ~~$202.0~~$210.4 million and ~~$206.0~~$212.0 million as of ~~May 2,~~January 30, 2021 and October 31, 2020, ~~and~~ ~~November 2, 2019~~, respectively. These foreign exchange contracts have maturities of 12 months or less and have not been designated as hedges for accounting purposes.

Interest Rate Derivatives

Ciena is exposed to floating rates of LIBOR interest on its term loan borrowings (see Note 1615 below) and has hedged such risk by entering into floating to fixed interest rate swap arrangements (“interest rate swaps”). The interest rate swaps fix the LIBOR rate for $350.0 million of the ~~New~~ 2025 Term Loan (as defined in Note 1615 below) at 2.957% through September 2023. The total notional amount of interest rate swaps in effect was $350.0 million as of ~~May 2, 2020~~January 30, 2021 and ~~November 2, 2019.~~October 31, 2020.

Ciena expects the variable rate payments to be received under the terms of the interest rate swaps to offset exactly the forecasted variable rate payments on the equivalent notional amounts of the term loan. These derivative contracts have been designated as cash flow hedges.

Other information regarding Ciena’s derivatives is immaterial for separate financial statement presentation. See Note 65 and Note 98 above.


~~(14)~~	~~ACCUMULATED OTHER COMPREHENSIVE INCOME~~

(13) ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes in accumulated balances of other comprehensive income (“AOCI”), net of tax, for the ~~six~~three months ended ~~May 2, 2020:~~January 30, 2021 (in thousands):


																Unrealized Gain/(Loss) on						Cumulative
	Unrealized Gain/(Loss) on								Cumulative							Available-for-sale Securities		Foreign Currency Forward Contracts		Forward Starting Interest Rate Swaps		Foreign Currency Translation Adjustment		Total
	Available-for-sale Securities		Foreign Currency Forward Contracts			Forward Starting Interest Rate Swaps			Foreign Currency Translation Adjustment			Total
Balance at November 2, 2019	$	152	$	925		$	(13,686	)	$	(9,475	)	$	(22,084	)
Balance at October 31, 2020															Balance at October 31, 2020	$	45	$	(219)	$	(21,535)	$	(13,649)	$	(35,358)
Other comprehensive gain (loss) before reclassifications	310		(9,559		)	(10,932		)	(21,490		)	(41,671		)	Other comprehensive gain (loss) before reclassifications	(49)		7,848		(659)		15,861		23,001
Amounts reclassified from AOCI	—		1,540			829			—			2,369			Amounts reclassified from AOCI	0		(1,231)		2,041		0		810
Balance at May 2, 2020	$	462	$	(7,094	)	$	(23,789	)	$	(30,965	)	$	(61,386	)
Balance at January 30, 2021															Balance at January 30, 2021	$	(4)	$	6,398	$	(20,153)	$	2,212	$	(11,547)

The following table summarizes the changes in AOCI, net of tax, for the ~~six~~three months ended ~~May 4, 2019:~~February 1, 2020 (in thousands):


	Unrealized Gain/(Loss) on						Cumulative
	Available-for-sale Securities		Foreign Currency Forward Contracts		Forward Starting Interest Rate Swaps		Foreign Currency Translation Adjustment		Total
Balance at November 2, 2019	$	152	$	925	$	(13,686)	$	(9,475)	$	(22,084)
Other comprehensive loss before reclassifications	(86)		(921)		(1,718)		(2,982)		(5,707)
Amounts reclassified from AOCI	0		(158)		238		0		80
Balance at February 1, 2020	$	66	$	(154)	$	(15,166)	$	(12,457)	$	(27,711)

Unrealized Gain/(Loss) on Cumulative
Available-for-sale Securities Foreign Currency Forward Contracts Forward Starting Interest Rate Swaps
Foreign Currency
Translation Adjustment
Total
Balance at November 3, 2018 $ (425 ) $ (3,060 ) $ 6,417
$ (8,712 ) $ (5,780 )
Other comprehensive income (loss) before reclassifications 413
(1,613 ) (10,013 ) (3,846 ) (15,059 )
Amounts reclassified from AOCI —
2,317
(684 ) —
1,633
Balance at May 4, 2019 $ (12 ) $ (2,356 ) $ (4,280 ) $ (12,558 ) $ (19,206 )

All amounts reclassified from AOCI related to settlement (gains) losses on foreign currency forward contracts designated as cash flow hedges impacted research and development expense on the Condensed Consolidated Statements of Operations. All amounts reclassified from AOCI related to settlement (gains) losses on forward starting interest rate swaps designated as cash flow hedges impacted interest and other income (loss), net, on the Condensed Consolidated Statements of Operations.


~~(15)~~	~~LEASES~~

(14) LEASES

Ciena leases over ~~1.4~~1.3 million square feet of facilities globally related to the ongoing operations of its business segments and related functions. Ciena’s principal executive offices are located in Hanover, Maryland. Ciena’s largest facilities are research and development centers located in Ottawa, Canada and Gurgaon, India. Ciena also has engineering and/or service delivery facilities located in San Jose, California; ~~Petaluma, California;~~ Alpharetta, Georgia; Quebec, Canada; Austin, Texas; and Pune and Bangalore, India. In addition, Ciena leases various smaller offices in regions throughout the world to support sales and services operations. Office facilities are leased under various non-cancelable operating or finance leases. Ciena's current leases have remaining terms that vary up to 1311 years. Certain leases provide for options to extend up to 10 years and/or options to terminate within ~~eight~~five years.

~~As discussed in Note 2, the restructuring reserve liability related to Ciena’s subleased space and vacated space for which subleases are being pursued was~~ ~~$11.1 million~~ ~~as of~~ ~~November 2, 2019. Upon Ciena’s adoption of ASC 842 on~~ ~~November 3, 2019~~, the existing Accrued liabilities and other short-term obligations and Other long-term obligations were reclassified as a reduction of the Operating right-of-use assets recorded in accordance with the updated guidance.

Leases included in the Condensed Consolidated Balance Sheets were as ~~follows:~~follows (in thousands):


	Classification	As of January 30, 2021		As of October 31, 2020
Operating leases:
Operating ROU assets	Operating right-of-use assets	$	54,244	$	57,026
Operating lease liabilities	Operating lease liabilities and Long-term operating lease liabilities	76,990		80,450
Finance leases:
Buildings, gross	Equipment, building, furniture and fixtures, net	$	73,776	$	70,791
Less: accumulated depreciation	Equipment, building, furniture and fixtures, net	(19,764)		(17,837)
Buildings, net		$	54,012	$	52,954
Finance lease liabilities	Accrued liabilities and other short-term obligations and other long-term obligations	$	66,409	$	64,401

Classification As of May 2, 2020
Operating leases:
Operating ROU Assets Operating right-of-use assets $ 47,864
Operating lease liabilities Operating lease liabilities and Long-term operating lease liabilities 69,196
Finance leases:
Buildings, gross Equipment, building, furniture and fixtures, net $ 66,931
Less: accumulated depreciation Equipment, building, furniture and fixtures, net (14,734 )
Buildings, net $ 52,197
Finance lease liabilities Accrued liabilities and other short-term obligations and other long-term obligations $ 62,152

ROU assets that involve subleased or vacant space aggregate $4.7 million as of January 30, 2021. These assets may become impaired if tenants are unable to service their obligations under the sublease, and/or if the estimates as to occupancy are not realized, either of which may be more likely as COVID-19 impacts evolve.

The components of lease expense included in the Condensed Consolidated Statement of Operations were as ~~follows:~~follows (in thousands):

Quarter Ended Six Months Ended
Classification May 2, 2020 May 2, 2020
Operating lease costs Operating expense $ 4,744
$ 9,201
Finance lease cost:
Amortization of finance ROU asset Operating expense 1,093
2,233
Interest on finance lease liabilities Interest expense 1,168
2,412
Total finance lease cost 2,261
4,645
Non-capitalized lease cost Operating expense 707
1,328
Variable lease cost⁽¹⁾
Operating expense 1,324
2,635
Net lease cost⁽²⁾
$ 9,036
$ 17,809


		Three Months Ended		Three Months Ended
	Classification	January 30, 2021		February 1, 2020
Operating lease costs	Operating expense	$	4,229	$	4,457
Finance lease cost:
Amortization of finance ROU asset	Operating expense	1,165		1,140
Interest on finance lease liabilities	Interest expense	1,221		1,244
Total finance lease cost		2,386		2,384
Non-capitalized lease cost	Operating expense	293		621
Variable lease cost(1)	Operating expense	1,599		1,311

Net lease cost(2)		$	8,507	$	8,773

(1) Variable lease costs include expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease. Variable lease costs are determined by whether they are to be included in base rent and if amounts are based on a consumer price index.

⁽²⁾Excludes other operating expense of ~~$2.2~~$2.3 million and ~~$6.5~~$4.3 million for the ~~quarter and six~~three months ended ~~May 2,~~January 30, 2021 and February 1, 2020, respectively, related to amortization of leasehold improvements.

Future minimum lease payments and the present value of minimum lease payments related to operating and finance leases as of ~~May 2, 2020~~January 30, 2021 were as ~~follows:~~follows (in thousands):


	Operating Leases		Finance Leases		Total
Remaining fiscal 2021	$	16,077	$	7,759	$	23,836
2022	19,112		8,215		27,327
2023	15,747		8,294		24,041
2024	13,237		8,310		21,547
2025	8,900		8,494		17,394
Thereafter	9,367		58,427		67,794
Total lease payments	82,440		99,499		181,939
Less: Imputed interest	(5,450)		(33,090)		(38,540)
Present value of lease liabilities	76,990		66,409		143,399
Less: Current portion of present value of minimum lease payments	(19,364)		(3,011)		(22,375)
Long-term portion of present value of minimum lease payments	$	57,626	$	63,398	$	121,024

Operating Leases Finance Leases Total
Remaining fiscal 2020 $ 10,052
$ 7,039
$ 17,091
2021 18,592
7,089
25,681
2022 14,030
7,524
21,554
2023 10,867
7,524
18,391
2024 8,805
7,584
16,389
Thereafter 12,464
58,786
71,250
Total lease payments 74,810
95,546
170,356
Less: Imputed interest (5,614 ) (33,394 ) (39,008 )
Present value of lease liabilities 69,196
62,152
131,348
Less: Current portion of present value of minimum lease payments (18,096 ) (2,585 ) (20,681 )
Long-term portion of present value of minimum lease payments $ 51,100
$ 59,567
$ 110,667

~~As of May 2, 2020, the~~The weighted average remaining lease terms and weighted average discount rates for operating and finance leases were as follows:


	As of January 30, 2021		As of October 31, 2020
Weighted-average remaining lease term in years:
Operating leases	4.68		4.87
Finance leases	11.46		11.71
Weighted-average discount rates:
Operating leases	2.82	%	2.82	%
Finance leases	7.56	%	7.56	%




~~Weighted-average remaining lease term in years:~~
~~Operating leases~~	~~4.79~~
~~Finance leases~~	~~12.22~~
~~Weighted-average discount rates:~~
~~Operating leases~~	~~3.12~~	%
~~Finance leases~~	~~7.56~~	%

~~As of November 2, 2019, minimum aggregate rentals under operating leases were as follows:~~(15) SHORT-TERM AND LONG-TERM DEBT

2020 2021 2022 2023 2024 Thereafter Total
Operating leases⁽¹⁾
$ 28,776
$ 24,184
$ 16,767
$ 13,393
$ 10,632
$ 26,110
$ 119,862

⁽¹⁾~~The amount for operating lease commitments above include estimated variable expenses relating to insurance, taxes, maintenance and other costs required by the applicable operating lease.~~


~~(16)~~	~~SHORT-TERM AND LONG-TERM DEBT~~

~~New~~ 2025 Term Loan

On January 23, 2020, Ciena entered into a Refinancing Amendment to Credit Agreement pursuant to which Ciena refinanced the entire outstanding amount of its then existing senior secured term loan ~~with an outstanding aggregate principal amount of $693.0 million as of January 23, 2020 and maturing on September 28, 2025 (the “Old 2025 Term Loan”)~~ and incurred a new senior secured term ~~loans~~loan in an aggregate principal amount of $693.0 million and maturing on September 28, 2025 (the ~~“New 2025~~“2025 Term Loan”).

The net carrying ~~values~~value of Ciena’s term ~~loans were~~loan was comprised of the following for the fiscal periods indicated (in thousands):

May 2, 2020 November 2, 2019
Principal Balance Unamortized Discount Deferred Debt Issuance Costs Net Carrying Value Net Carrying Value
New 2025 Term Loan $ 691,268
$ (1,742 ) $ (3,240 ) $ 686,286
$ —
Old 2025 Term Loan $ —
$ —
$ —
$ —
$ 687,406


	January 30, 2021								October 31, 2020
	Principal Balance		Unamortized Discount		Deferred Debt Issuance Costs		Net Carrying Value		Net Carrying Value
2025 Term Loan	$	686,070	$	(1,495)	$	(2,789)	$	681,786	$	683,286

Deferred debt issuance costs that were deducted from the carrying amounts of the term ~~loans~~loan totaled ~~$3.2~~$2.8 million at ~~May 2, 2020~~January 30, 2021 and ~~$3.6~~$2.9 million at ~~November 2, 2019.~~October 31, 2020. Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate, through the maturity of the term ~~loans.~~loan. The amortization of deferred debt issuance costs for ~~these~~this term ~~loans are~~loan is included in interest expense, and ~~were $0.3~~was $0.2 million during the first ~~six~~three months of each of fiscal ~~2020~~2021 and fiscal ~~2019.~~2020. The carrying value of the term ~~loans~~loan listed above is also net of any unamortized debt discounts.

As of ~~May 2, 2020,~~January 30, 2021, the estimated fair value of the ~~New~~ 2025 Term Loan was ~~$677.4~~$686.1 million. Ciena’s term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its term loan using a market approach based on observable inputs, such as current market transactions involving comparable securities.


~~(17)~~	~~EARNINGS PER SHARE CALCULATION~~

(16) EARNINGS PER SHARE CALCULATION

The following tables (in thousands, except per share amounts) reconcile basic net income per common share (“Basic EPS”) and diluted net income per potential common share (“Diluted EPS”). Basic EPS is computed using the weighted average number of common shares outstanding. Diluted EPS is computed using the weighted average number of the following, in each case, to the extent the effect is not anti-dilutive: (i) common shares outstanding; (ii) shares issuable upon vesting of stock unit awards; and (iii) shares issuable under Ciena’s employee stock purchase plan and upon exercise of outstanding stock options, using the treasury stock method.


	Quarter Ended
	January 30,		February 1,
Numerator	2021		2020




Net income used to calculate Basic and Diluted EPS	$	55,348	$	62,328

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
Numerator 2020 2019 2020 2019
Net income used to calculate Basic and Diluted EPS $ 91,655
$ 52,738
$ 153,983
$ 86,354

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
Denominator 2020 2019 2020 2019
Basic weighted average shares outstanding 153,858
156,170
154,099
156,244
Add: Shares underlying outstanding stock options and stock unit awards and issuable under employee stock purchase plan 1,283
2,119
1,344
1,967
Dilutive weighted average shares outstanding 155,141
158,289
155,443
158,211

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
EPS 2020 2019 2020 2019
Basic EPS $ 0.60
$ 0.34
$ 1.00
$ 0.55
Diluted EPS $ 0.59
$ 0.33
$ 0.99
$ 0.55


	Quarter Ended
	January 30,	February 1,
Denominator	2021	2020
Basic weighted average shares outstanding	155,174	154,334
Add: Shares underlying outstanding stock options and stock unit awards and issuable under employee stock purchase plan	1,409	1,404




Dilutive weighted average shares outstanding	156,583	155,738


	Quarter Ended
	January 30,		February 1,
EPS	2021		2020
Basic EPS	$	0.36	$	0.40
Diluted EPS	$	0.35	$	0.40

The following table summarizes the weighted average shares excluded from the calculation of the denominator for Diluted EPS due to their anti-dilutive effect for the periods indicated (in thousands):

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Shares underlying stock options and stock unit awards 203
283
467
257
Total shares excluded due to anti-dilutive effect 203
283
467
257


	Quarter Ended
	January 30,	February 1,
	2021	2020
Shares underlying stock options and stock unit awards	135	731
Total shares excluded due to anti-dilutive effect	135	731

(17) STOCKHOLDERS’ EQUITY


~~(18)~~	~~STOCKHOLDERS’ EQUITY~~

Stock Repurchase Program

On December 13, 2018, Ciena announced that its Board of Directors authorized a program to repurchase up to $500 million of Ciena’s common stock. ~~The program may be modified, suspended, or discontinued at any time. Due to the continued uncertainty surrounding the duration and severity~~After temporarily suspending repurchases of ~~potential macroeconomic impacts of COVID-19, Ciena considered it prudent to temporarily suspend purchases of our~~Ciena’s common stock ~~under our~~during fiscal 2020, Ciena reinstituted its stock repurchase program ~~effective as~~in the first quarter of ~~March 17, 2020.~~2021. The ~~reinstatement of the program and 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. The program may be modified, suspended, or discontinued at any time.

The following table summarizes activity of the stock repurchase program, reported based on trade date:


	Shares Repurchased	Weighted-Average Price per Share		Amount Repurchased (in thousands)
Cumulative balance at October 31, 2020	5,710,912	$	39.33	$	224,611
Repurchase of common stock under the stock repurchase program	251,578	52.49		13,206
Cumulative balance at January 30, 2021	5,962,490	$	39.89	$	237,817

Shares Repurchased Weighted-Average Price per Share Amount Repurchased (in thousands)
Cumulative balance at November 2, 2019 3,838,466
$ 39.10
$ 150,076
Repurchase of common stock under the stock repurchase program 1,872,446
39.81
74,535
Cumulative balance at May 2, 2020 5,710,912
$ 39.33
$ 224,611

The purchase price for the shares of Ciena’s stock repurchased is reflected as a reduction of common stock and additional paid-in capital.

Stock Repurchases Related to Stock Unit Award Tax Withholdings

Ciena repurchases shares of common stock to satisfy employee tax withholding obligations due on vesting of stock unit awards. The purchase price of ~~$18.2~~$19.2 million for the shares of Ciena’s stock repurchased during the first ~~six~~three months of fiscal ~~2020~~2021 is reflected as a reduction to stockholders’ equity. Ciena is required to allocate the purchase price of the repurchased shares as a reduction of common stock and additional paid-in capital.


~~(19)~~	~~SHARE-BASED COMPENSATION EXPENSE~~

At Ciena’s 2020 Annual Meeting of Stockholders on April 2, 2020, Ciena’s stockholders approved an amendment to Ciena's 2017 Omnibus Incentive Plan (the “2017 Plan”) to increase the number of shares available for issuance thereunder by 12.2 million shares, which became effective as of such date. As of May 2, 2020, the total number of shares authorized for issuance under the 2017 Plan is 21.1 million and approximately 14.9 million shares remained available for issuance thereunder.(18) SHARE-BASED COMPENSATION EXPENSE

The following table summarizes share-based compensation expense for the periods indicated (in thousands):


	Quarter Ended
	January 30,		February 1,
	2021		2020
Product costs	$	953	$	671
Service costs	1,205		842
Share-based compensation expense included in cost of goods sold	2,158		1,513
Research and development	4,794		3,849
Sales and marketing	5,816		4,613
General and administrative	6,358		5,527

Share-based compensation expense included in operating expense	16,968		13,989
Share-based compensation expense capitalized in inventory, net	(162)		100
Total share-based compensation	$	18,964	$	15,602

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Product costs $ 827
$ 702
$ 1,498
$ 1,339
Service costs 1,036
907
1,878
1,677
Share-based compensation expense included in cost of goods sold 1,863
1,609
3,376
3,016
Research and development 4,822
4,083
8,671
7,474
Sales and marketing 5,264
4,346
9,877
8,131
General and administrative 5,975
5,491
11,502
10,603
Share-based compensation expense included in operating expense 16,061
13,920
30,050
26,208
Share-based compensation expense capitalized in inventory, net 53
78
153
138
Total share-based compensation $ 17,977
$ 15,607
$ 33,579
$ 29,362

As of ~~May 2, 2020~~,January 30, 2021, total unrecognized share-based compensation expense was approximately ~~$135.1~~$169.0 million, which relates to unvested stock unit awards and is expected to be recognized over a weighted-average period of ~~1.6~~1.68 years.

(19) SEGMENTS AND ENTITY-WIDE DISCLOSURES


~~(20)~~	~~SEGMENTS AND ENTITY-WIDE DISCLOSURES~~

Segment Reporting

Ciena has the following operating segments for reporting purposes: (i) Networking Platforms; (ii) Platform Software and Services; (iii) Blue Planet Automation Software and Services; and (iv) Global Services. During fiscal 2019, Ciena separated its previous Software and Software-Related Services segment into 2 stand-alone operating segments. Because Ciena previously disclosed its Platform Software and Services and Blue Planet Automation Software and Services as distinct product lines in its presentation of segment revenue for Software and Software-Related Services, there is no significant change to the presentation of segment revenues as a result of this separation. Comparative periods have been retrospectively adjusted to disclose segment profit for Platform Software and Services and Blue Planet Automation Software and Services. See Note 3 to Ciena’s Condensed Consolidated Financial Statements.

Ciena's long-lived assets, including equipment, building, furniture and fixtures, ~~right-of-use~~ROU assets, finite-lived intangible assets and maintenance spares, are not reviewed by Ciena's chief operating decision maker for purposes of evaluating performance and allocating resources. As of ~~May 2, 2020,~~January 30, 2021, equipment, building, furniture and fixtures, net, totaled ~~$260.9~~$281.2 million, and operating ~~right-of-use~~ROU assets totaled ~~$47.9~~$54.2 million both of which support asset groups within Ciena’s 4 operating segments and unallocated selling and general and administrative activities. As of ~~May 2, 2020,~~January 30, 2021, finite-lived intangible assets, goodwill and maintenance spares are assigned to asset groups within the following segments (in thousands):


	May 2, 2020											January 30, 2021
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total			Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total

Other intangible assets, net	$	15,586	$	—	$	99,950	$	—	$	115,536	Other intangible assets, net	$	12,924	$	0	$	78,592	$	0	$	91,516
Goodwill	$	65,029	$	156,191	$	89,049	$	—	$	310,269	Goodwill	$	66,054	$	156,191	$	89,049	$	0	$	311,294
Maintenance spares, net	$	—	$	—	$	—	$	58,476	$	58,476	Maintenance spares, net	$	0	$	0	$	0	$	63,008	$	63,008

~~Segment Revenue~~

~~The table below sets forth Ciena’s segment revenue for the respective periods (in thousands):~~

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Revenue:
Networking Platforms
Converged Packet Optical $ 654,294
$ 623,838
$ 1,245,844
$ 1,172,835
Packet Networking 64,167
73,138
131,675
144,707
Total Networking Platforms 718,461
696,976
1,377,519
1,317,542

Platform Software and Services 44,985
35,229
96,873
76,827

Blue Planet Automation Software and Services 15,017
12,473
30,482
27,447

Global Services
Maintenance Support and Training 71,479
68,788
133,271
130,065
Installation and Deployment 34,242
41,322
69,196
71,944
Consulting and Network Design 9,869
10,223
19,624
19,713
Total Global Services 115,590
120,333
222,091
221,722

Consolidated revenue $ 894,053
$ 865,011
$ 1,726,965
$ 1,643,538

Segment Profit (Loss)

Segment profit (loss) is determined based on internal performance measures used by Ciena’s chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; amortization of intangible assets; significant asset impairments and restructuring costs; acquisition and integration costs; interest and other income (loss), net; interest expense; loss on extinguishment and modification of debt and provision for income taxes.

The table below sets forth Ciena’s segment profit (loss) and the reconciliation to consolidated net income during the respective periods indicated (in thousands):


	Quarter Ended
	January 30,		February 1,
	2021		2020
Segment profit (loss):
Networking Platforms	$	156,431	$	168,270
Platform Software and Services	27,660		28,951
Blue Planet Automation Software and Services	(2,434)		(3,113)
Global Services	43,493		45,527
Total segment profit	225,150		239,635
Less: Non-performance operating expenses
Selling and marketing	97,278		107,066
General and administrative	39,993		42,468
Amortization of intangible assets	5,910		5,853
Significant asset impairments and restructuring costs	5,867		4,472
Acquisition and integration costs	307		1,819

Add: Other non-performance financial items
Interest expense and other income (loss), net	(8,481)		(5,169)
Loss on extinguishment and modification of debt	0		(646)
Less: Provision for income taxes	11,966		9,814
Consolidated net income	$	55,348	$	62,328

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Segment profit (loss):
Networking Platforms $ 210,987
$ 175,191
$ 379,256
$ 311,782
Platform Software and Services 21,668
12,477
50,619
32,940
Blue Planet Automation Software and Services (4,399 ) (5,941 ) (7,512 ) (7,988 )
Global Services 53,540
54,981
99,068
94,682
Total segment profit 281,796
236,708
521,431
431,416
Less: Non-performance operating expenses
  Selling and marketing 101,214
103,502
208,280
201,615
  General and administrative 42,030
42,154
84,498
81,397
  Amortization of intangible assets 5,839
5,529
11,692
11,057
  Significant asset impairments and restructuring costs 3,811
4,068
8,283
6,341
  Acquisition and integration costs 1,414
1,135
3,233
2,743
Add: Other non-performance financial items
  Interest expense and other income (loss), net (10,525 ) (9,715 ) (15,694 ) (14,903 )
Loss on extinguishment and modification of debt —
—
(646 ) —
Less: Provision for income taxes 25,308
17,867
35,122
27,006
Consolidated net income $ 91,655
$ 52,738
$ 153,983
$ 86,354

Entity-Wide Reporting

Ciena’s operating segments each engage in business across 3 geographic regions: Americas; Europe, Middle East and Africa (“EMEA”); and Asia-Pacific, Japan and India (“APAC”). Americas include activities in North America and South America (previously, Caribbean and Latin America (“CALA”)). The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena’s delivery of products and performance of services. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
Americas 650,381
615,492
1,224,385
1,131,973
EMEA 141,431
114,993
271,396
244,183
APAC 102,241
134,526
231,184
267,382
Total $ 894,053
$ 865,011
$ 1,726,965
$ 1,643,538
23

Ciena’s revenue includes $598.4 million and $545.6 million of United States revenue for the second quarter of fiscal 2020 and 2019, respectively. For the six months ended May 2, 2020 and May 4, 2019, United States revenue was $1.1 billion and $1.0 billion, respectively. No other country accounted for 10% or more of total revenue for the periods presented above.

The following table reflects Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating ~~right-of-use~~ROU assets, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, and operating ~~right-of-use~~ROU assets specifically identified. Equipment, building, furniture and fixtures, net, and operating ~~right-of-use~~ROU assets attributable to geographic regions outside of the U.S. and Canada are reflected as “Other International.” For the periods below, Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, and operating ~~right-of-use~~ROU assets was as follows (in thousands):


	January 30, 2021		October 31, 2020
Canada	$	226,331	$	214,188
United States	62,980		65,321
Other International	46,161		49,894
Total	$	335,472	$	329,403

May 2,
2020 November 2,
2019
Canada $ 198,334
$ 211,901
United States 75,110
58,119
Other International 35,287
16,864
Total $ 308,731
$ 286,884

(20) COMMITMENTS AND CONTINGENCIES

~~For the periods below, the only customers that accounted for at least 10% of Ciena’s revenue were as follows (in thousands):~~

Quarter Ended Six Months Ended
May 2, May 4, May 2, May 4,
2020 2019 2020 2019
AT&T $ 105,630
$ 108,416
$ 189,640
$ 195,125
Verizon n/a
106,350
203,630
202,587
Web-scale provider n/a
n/a
n/a
174,853
Total $ 105,630
$ 214,766
$ 393,270
$ 572,565



~~n/a~~	~~Denotes revenue representing less than 10% of total revenue for the period~~

The Web-scale provider noted above contributed greater than 10% of total revenue for the first time in fiscal 2019 and purchased products from each of Ciena’s operating segments excluding Blue Planet Automation Software and Services. The other customers identified above purchased products and services from each of Ciena’s operating segments.


~~(21)~~	~~COMMITMENTS AND CONTINGENCIES~~

Canadian Grant

During fiscal 2018, Ciena entered into agreements related to the Evolution of Networking Services through a Corridor in Quebec and Ontario for Research and Innovation (“ENCQOR”) project with the Canadian federal government, the government of the province of Ontario and the government of the province of Quebec to develop a 5G technology corridor between Quebec and Ontario to promote research and development, small business enterprises and entrepreneurs in Canada. Under these agreements, Ciena can receive up to an aggregate CAD$57.6 million (approximately ~~$40.9~~$45.1 million) in reimbursement from the 3 Canadian government entities for eligible costs over a period commencing on February 20, 2017 and ending on March 31, 2022. Ciena anticipates receiving recurring disbursements over this period. Amounts received under the agreements are subject to recoupment in the event that Ciena fails to achieve certain minimum investment, employment and project milestones. As of ~~May 2, 2020,~~January 30, 2021, Ciena has recorded CAD$~~34.5~~44.2 million (approximately ~~$24.5~~$34.6 million) in cumulative benefits as a reduction in research and development expense of which CAD$~~5.6~~3.6 million ($~~4.2~~2.8 million) was recorded in the first ~~six~~three months of fiscal ~~2020.~~2021. As of ~~May 2, 2020,~~January 30, 2021, amounts receivable from this grant were CAD$~~7.3~~3.2 million ($~~5.2~~2.5 million).

Tax Contingencies

Ciena is subject to various tax liabilities arising in the ordinary course of business. Ciena does not expect that the ultimate settlement of these tax liabilities will have a material effect on its results of operations, financial position or cash flows.

Litigation

Ciena is subject to various legal proceedings, claims and other matters arising in the ordinary course of business, including those that relate to employment, commercial, tax and other regulatory matters. Ciena is also subject to intellectual property related claims, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. Ciena does not expect that the ultimate costs to resolve such matters will have a material effect on its results of operations, financial position or cash flows.

(21) SUBSEQUENT EVENTS

Stock Repurchase Program

From the end of the first quarter of fiscal 2021 through March 5, 2021, Ciena repurchased an additional 188,169 shares of its common stock, for an aggregate purchase price of $10.1 million at an average price of $53.69 per share, inclusive of repurchases pending settlement. As of March 5, 2021, Ciena has repurchased an aggregate of 6,150,659 shares and has an aggregate of $252.1 million of authorized funds remaining under its stock repurchase program.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This 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. Forward-looking statements may appear throughout this report, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” 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~~You should be aware that the forward-looking statements ~~may relate to, among other things: our competitive landscape; market conditions and growth opportunities;~~

factors impacting our industry and markets; factors impacting the businesses of network operators and their network architectures; adoption of next-generation network technology and software programmability and automation of networks; our strategy, including our research and development, supply chain and go-to-market initiatives; efforts to increase application of our solutionscontained 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 and changes in our effective tax rates; market risks associated with financial instruments and foreign currency exchange rates; and future responses to and effects of the COVID-19 pandemicthis report are based on our ~~business, operations, liquidity~~current views and ~~financial results. These statements~~assumptions, and are subject to known and unknown risks, uncertainties and other factors ~~and~~that may cause actual events or results ~~may~~to differ ~~materially due to factors such as:~~

~~our ability to execute our business and growth strategies;~~

~~fluctuations in our revenue, gross margin and operating results and our financial results generally;~~

the loss of our customers, including the loss of a single large customer, a significant reduction in one or more customers’ spending, or a material change in their networking or procurement strategies;

the duration and severity of the COVID-19 pandemic and the impact of countermeasures taken to mitigate its spread on macroeconomic conditions, economic activity, demand for our technology solutions, short- and long-term changes in customer or end user needs, continuity of supply chain, our business operations, liquidity and financial results;

~~the competitive environment in which we operate;~~

~~market acceptance of products and services currently under development and delays in product or software development;~~

~~lengthy sales cycles and onerous contract terms with communications service providers, Web-scale providers and other large customers;~~

~~product performance or security problems and undetected errors;~~

~~our ability to diversify our customer base beyond our traditional customers and to broaden the application for our solutions in communications networks;~~

~~the level of growth in network traffic and bandwidth consumption and the corresponding level of investment in network infrastructures by network operators;~~

~~the international scale of our operations;~~

~~fluctuations in currency exchange rates;~~

~~our ability to forecast accurately demand for our products for purposes of inventory purchase practices;~~

~~the impact of pricing pressure and price compression that we regularly encounter in our markets;~~

~~our ability to enforce our intellectual property rights, and costs we may incur in response to intellectual property right infringement claims made against us;~~

~~the continued availability, on commercially reasonable terms, of software and other technology under third-party licenses;~~

~~the potential failure to maintain the security of confidential, proprietary or otherwise sensitive business information or systems or to protect against cyber attacks;~~

~~the performance of our third-party contract manufacturers;~~

~~changes or disruption in components or supplies provided by third parties, including sole and limited source suppliers;~~

~~our ability to manage effectively our relationships with third-party service partners and distributors;~~

~~unanticipated risks and additional obligations in connection with our resale of complementary products or technology of other companies;~~

~~our ability to grow and to maintain our new distribution relationships under which we will make available certain technology as a component;~~

~~our exposure to the credit risks of our customers and our ability to collect receivables;~~

~~modification or disruption of our internal business processes and information systems;~~

~~the effect of our outstanding indebtedness on our liquidity and business;~~

~~fluctuations in our stock price and our ability to access the capital markets to raise capital;~~

~~unanticipated expenses or disruptions to our operations caused by facilities transitions or restructuring activities;~~

~~our ability to attract and retain experienced and qualified personnel;~~

~~disruptions to our operations caused by strategic acquisitions and investments or the inability to achieve the expected benefits and synergies of newly-acquired businesses;~~

~~our ability to commercialize and to grow our software business and address networking strategies including software-defined networking and network function virtualization;~~

changes in, and the impact of, government regulations, including with respect to: the communications industry generally; the business of our customers; the use, import or export of products; and the environment, potential climate change, and other social initiatives;

the impact of the Tax Cuts and Jobs Act, future legislation or executive action in the U.S. relating to tax policy, changes in tax regulations and related accounting, and changes in our effective tax rates;

future legislation or executive action in the U.S. or foreign counties relating to trade regulations, including the imposition of tariffs and duties or efforts to withdraw from or materially modify international trade agreements;

~~factors beyond our control such as natural disasters, acts of war or terrorism, and public health emergencies, including the COVID-19 pandemic;~~

~~the write-down of goodwill, long-lived assets, or our deferred tax assets;~~

~~our ability to maintain effective internal controls over financial reporting and liabilities that result from the inability to comply with corporate governance requirements; and~~


•	~~adverse results in litigation matters.~~

materially.

~~These are only some of the factors that may affect the forward-looking statements contained in this report.~~

For a discussion identifying ~~additional~~some of the 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 report. For a more complete understanding of the risks associated with an investment in our securities, you should review these factors and the rest of this report in combination with the more detailed description of our business and management’s discussion and analysis of financial condition and risk factors described in our annual report onForm 10-K for fiscal ~~2019,~~2020, which we filed with the SEC on December ~~20, 2019 (the “2019~~18, 2020 (our “2020 Annual Report”). However, we operate in a very competitive and rapidly changing environment and new risks and uncertainties emerge, are identified or become apparent from time to time. We cannot predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this ~~report. You should be aware that the forward-looking statements contained in this~~ report, ~~are based on our current views~~ and ~~assumptions. We~~we undertake no obligation to revise or to update any forward-looking statements made in this 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 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 report to “Ciena,” the “Company,” “we,” “us” and “our” refer to Ciena Corporation and its consolidated subsidiaries.

Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our 2020 Annual Report and our Condensed Consolidated Financial Statements and the accompanying notes thereto included in Item 1 of Part I of this report.

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 ~~support~~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 other emerging network operators.

~~Our solutions~~ include ~~our portfolio of~~ Networking Platforms, including our Converged Packet Optical and ~~Packet Networking products, that~~Routing and Switching portfolios, which can be applied from the network core to ~~end user~~end-user access points, and ~~that~~which allow network operators to scale capacity, increase transmission speeds, allocate traffic and adapt dynamically to changing end-user service demands. WeTo complement these solutions, we offer Platform Software, ~~that~~which provides management, ~~and~~ domain control ~~of our hardware solutions~~ and ~~automates~~specialized applications that automate network lifecycle operations, including provisioning equipment and ~~services. Through our Blue Planet® Automation Software, we enable network providers to use~~services, network data, analytics and policy-based assurance to achieve closed loop automation across multi-vendor and multi-domain network ~~environments, streamlining key~~environments. Through our Blue Planet® Software suite, we enable customers to transform their business and operations support systems through software-based automation of their network ~~processes.~~and IT infrastructures. To complement our hardware and software products, we offer a broad range of services that help our customers build, operate and improve their networks and associated operational ~~environments.~~environments, including network optimization and migration offerings.

We refer to our complete portfolio vision as the Adaptive Network™. The Adaptive Network emphasizes a programmable network infrastructure, software control and automation capabilities, and network analytics and intelligence. 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.

Impact of the COVID-19 Pandemic

~~COVID-19 was declared a pandemic in March 2020 and~~

Demand for Products & Services.The demand environment continues to ~~have a significant impact on the global economy, the industries we serve and our operations. In response to~~be adversely impacted by the COVID-19 pandemic, ~~we have prioritized~~resulting in lower order volumes and revenue in the ~~safety~~first quarter of ~~our employees and business partners, while continuing to support the needs of our customers and communities during this unprecedented period.~~

~~Employees.~~ ~~We have implemented travel bans and restrictions, temporarily closed offices and,~~fiscal 2021 as of June 10, 2020 approximately 96% of our employees globally were working from home on a regular basis. Given our long-standing practice of flexible working arrangements, our distributed workforce is accustomedcompared to the ~~digital platforms and virtual collaboration tools we use~~first quarter of fiscal 2020. We expect this more cautious spending environment to ~~maintain productivity and to remain in contact with one another and our business partners. For the small number of employees who need to be in offices, laboratory environments or~~continue through at business partner sites to perform their roles, we are taking appropriate precautions to protect their health and safety. We have adopted new employee benefits and wellbeing initiatives to support our employees, including initiatives for those who are now working remotely. We also continue to hire and on-board new employees in a remote environment, including 229 new hires, which resulted in net headcount growth of approximately 96 employees, duringleast the second quarter of fiscal ~~2020. We are proud of the way in which our employees have continued~~2021 and expect these conditions to ~~productively execute on our innovation roadmap~~adversely affect order volumes and operating goals, including achieving the commercial availability of our fifth-generation WaveLogic coherent modem technology. However, sustained restrictions on the ability of our research and development employees to work in our facilities as a result of restrictions imposed by governments, or us, could make it more difficult for them to collaborate as effectivelyrevenue in the ~~development~~short term, as compared to our first half of ~~new solutions.~~fiscal 2020.

~~Business & Operations~~. We have 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 the second quarter of fiscal 2020, we experienced higher than typical orders for our products and services among a concentrated set of larger customers with whom we have existing positions as a supplier. We believe some portion of these orders, in the face of the pandemic, likely reflects short-term purchasing behaviors based on customer-specific considerations described below. However, our revenue for the second quarter of fiscal 2020 was negatively impacted by some disruption within our supply chain, customer fulfillment and logistics, and sales and marketing activities, which adversely impacted our business as described below.

~~Supply Chain~~. We rely on third-party manufacturing operations in Mexico, Thailand, the United States and Canada. We also rely on a global component supply network involving many vendors and countries throughout the world. During the second quarter of fiscal 2020, some of our component suppliers – particularly those with facilities in China and Malaysia – experienced challenges related to COVID-19 that resulted in temporary closures or reductions of supply capacity. Although in many cases we were able to overcome these conditions through execution of our mitigation planning, supply chain disruptions negatively impacted our revenue for the second fiscal quarter of 2020. We continue to take steps, including multi-sourcing and pre-ordering components and finished goods inventory, in an effort to reduce the impact should such conditions persist or exacerbate. However, such supply chain disruptions may continue, or worsen, in the future.

Services and Customer ~~Fulfillment~~Fulfillment.~~. During the second quarter of fiscal 2020, we experienced~~ We continue to experience 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, which adversely impacted revenue. These~~gatherings. We expect these conditions ~~have also made it more challenging~~ to ~~ramp~~persist in the short term and, ~~operationalize newer projects and recent customer design wins, primarily in international markets. We~~as a result, to continue to ~~take steps~~adversely impact our revenue and ~~work with customers to ensure their business needs are supported, while protecting the health and safety~~results of our employees, customers and business partners. However, should restrictions or disruptions of transportation persist or worsen, such as reduced availability of air transport, port closures, or increased border controls or closures, our operations and ability to meet customer demand could be materially adversely affected.operations.

Sales & Marketing. The competitive nature of our business depends on our ability to conduct sales and marketing activities with our customers. For instance, in the past few years, our ability to be first to market with leading networking solutions, and to conduct sales and marketing activities around these new technology offerings, has had a significant impact on our revenue and growth. However, restrictionsRestrictions on travel due to COVID-19 and limitations on interactions with customers, such as field and lab trials, have continued to negatively ~~impacted~~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. ~~This is particularly the case where~~Delays in customers operationalizing new network projects that we ~~do not~~anticipated occurring on their original timelines continue to adversely affect our revenue. Conversely, our recent gross margin performance has 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 ~~longer-standing supply relationships, such as within international markets and for our Blue Planet Automation Software~~lower margins.

Market Growth & ~~Services segment and our Packet Networking product line.~~

~~Demand for Products & Services~~.Conditions. As a result of the ~~unique and increased demands placed on network infrastructures as a result~~impact of the COVID-19 pandemic on market dynamics, particularly in the enterprise business segments of our communications service provider customers, the growth rates in our addressable markets have been adversely impacted. We expect these market dynamics, including constrained customer spending and the ~~related increase in remote working worldwide, we believe certain longer-term trends associated with cloud network adoption, networking resilience and flexibility, and~~decreased velocity of new business execution, to persist through at least the ~~need to promote automation, may be accelerated. During the second quarter~~first half of fiscal 2020, we experienced higher than typical orders for our products and services among a concentrated set of larger customers with whom we have existing positions as a supplier. We believe some portion of these orders likely reflects short-term purchasing behaviors based on customer-specific considerations in the face of the pandemic, including: customer concerns about future continued availability of supply; implementation of customer business continuity actions; our desire for increased visibility into expected demand; customer consumption of existing inventory or spare equipment; additional network capacity requirements; acceleration of capital spending; and, possibly, increased bandwidth demands being placed on networks due to the pandemic. We cannot predict whether this increase in orders will continue and, if so, for how long. Due to the unprecedented nature of the COVID-19 pandemic, it is unclear whether the current bandwidth demand, or the increased demand for our solutions experienced in the second quarter of fiscal 2020, will continue or is sustainable during the pandemic or the remainder of fiscal 2020.2021.

~~Liquidity & Balance Sheet.~~ As of the end of the second quarter of fiscal 2020, we had $988.5 million in cash and short-term investments. We believe our strong liquidity and balance sheet position is an important competitive differentiator at this time. It enables us to continue to invest in innovation, ensure a strong inventory position to support customers and provide for working capital needs. In light of the uncertainty surrounding the duration and severity of potential macroeconomic impacts of COVID-19, on March 17, 2020 we temporarily suspended purchases of our common stock under our stock repurchase program and have primarily reallocated our investments principally to U.S. government-backed funds.

~~Community~~. Our global workforce has undertaken a range of volunteering and charitable actions to support our neighbors, communities and front-line health care workers during this challenging time. We have enhanced by three times our corporate charitable matching program for employee donations and volunteering, and our employees have volunteered their time in important ways during this crisis. For example, we have donated personal protective equipment and have been 3-D printing and designing faces shields and components for health care workers.

The COVID-19 pandemic and ~~resulting~~ countermeasures taken to contain its spread have caused economic and financial disruptions globally. We continue to monitor the situation and actively assess further implications to our business, supply chain, fulfillment operations and customer demand. However, the COVID-19 situation remains dynamic, and the duration and severity of its impact on our business and results of operations ~~during fiscal 2020 and beyond~~in future periods remains 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.

~~Investment in Adaptive Network Offerings and 5G Innovation~~

We have continued to use our significant research and development investment capacity to push the pace of innovation in our markets and provide offerings that promote our Adaptive Network vision through further advances in programmable hardware, analytics, and control and automation. In the first quarter of fiscal 2020, we began market trials of our fifth-generation WaveLogic coherent modem technology, which is capable of delivering 800 gigabits of capacity per second over a single wavelength. In the second quarter of fiscal 2020, this technology became commercially available and began shipping on certain Converged Packet Optical platforms.

In February 2020, we also announced the future addition of several new routing platforms to support the demands of mobile xHaul (fronthaul, midhaul and backhaul) transport, which we expect to make available in the second half of calendar 2020. Designed to enable mobile network operators to migrate from 4G to 5G networks, these routers leverage our Adaptive Network vision and Blue Planet Automation Software to deliver end-to-end IP-based services in a more simplified and modular manner than traditional router-based IP network designs. In addition, we enhanced our Blue Planet Intelligent Automation software portfolio for 5G automation applications, including vendor-agnostic network slicing features and dynamic planning capabilities that are intended to better enable mobile network operators to deliver 5G mobile services.

~~Available Information.~~ Our quarterly reports on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K, and any amendments thereto filed or furnished with the SEC are available through the SEC’s website at www.sec.gov and are available free of charge on our website as soon as reasonably practicable after we file or furnish these documents. We routinely post the reports above, recent news and announcements, financial results and other information about Ciena that is important to investors in the “Investors” section of our website at www.ciena.com. Information on our website is not deemed to be incorporated by reference into this report. Investors are encouraged to review the “Investors” section of our website because, as

~~with the other disclosure channels that we use, from time to time we may post material information on that site that is not otherwise disseminated by us.~~

For additional information onregarding our business, industry, market opportunity, competitive landscape, and strategy, see our ~~2019~~2020 Annual ~~Report.~~Report, including the discussion in that report of the impact of the COVID-19 pandemic on our business, supply chain, and market conditions.

Consolidated Results of Operations

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 Note 2019 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Quarter ended ~~May 2, 2020~~January 30, 2021 as compared to the quarter ended ~~May 4, 2019~~February 1, 2020

Revenue

~~Despite increases in revenue within certain segments in~~During the ~~second~~first quarter of fiscal 2020 as compared to the second quarter of fiscal 2019, our revenue was adversely affected during the second quarter of fiscal 2020 due to the impact of the COVID-19 pandemic and its resulting supply chain and customer fulfillment disruptions described above.

~~During the second quarter of fiscal 2020,~~2021, approximately ~~15.0%~~17.9% of our revenue was non-U.S. Dollar-denominated, primarily including sales in Euros, Canadian Dollars, Japanese Yen, British Pounds, and Brazilian Reais. During the ~~second~~first quarter of fiscal 2021, as compared to the first quarter of fiscal 2020, ~~as compared to the second quarter of fiscal 2019,~~ the U.S. Dollar ~~generally strengthened~~fluctuated against these currencies. Consequently, our revenue reported in U.S. Dollars ~~was reduced~~ slightly increased by approximately ~~$5.8~~$2.6 million, or ~~0.6%~~0.4%, as compared to the ~~second~~first quarter of fiscal ~~2019.~~2020. The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):


	Quarter Ended						Increase						Quarter Ended
	May 2, 2020		%*	May 4, 2019		%*	(decrease)			%**			January 30, 2021		%*	February 1, 2020		%*	Increase (decrease)		%**
Revenue:												Revenue:
Networking Platforms												Networking Platforms
Converged Packet Optical	$	654,294	73.2	$	623,838	72.1	$	30,456		4.9		Converged Packet Optical	$	512,324	67.7	$	591,549	71.0	$	(79,225)	(13.4)
Packet Networking	64,167		7.2	73,138		8.5	(8,971		)	(12.3	)
Routing and Switching												Routing and Switching	64,307		8.5	67,508		8.1	(3,201)		(4.7)
Total Networking Platforms	718,461		80.4	696,976		80.6	21,485			3.1		Total Networking Platforms	576,631		76.2	659,057		79.1	(82,426)		(12.5)

Platform Software and Services	44,985		5.0	35,229		4.0	9,756			27.7		Platform Software and Services	49,839		6.6	51,888		6.2	(2,049)		(3.9)

Blue Planet Automation Software and Services	15,017		1.7	12,473		1.4	2,544			20.4		Blue Planet Automation Software and Services	16,934		2.2	15,466		1.9	1,468		9.5

Global Services												Global Services
Maintenance Support and Training	71,479		8.0	68,788		8.0	2,691			3.9		Maintenance Support and Training	67,630		8.9	61,793		7.4	5,837		9.4
Installation and Deployment	34,242		3.8	41,322		4.8	(7,080		)	(17.1	)	Installation and Deployment	39,611		5.2	34,954		4.2	4,657		13.3
Consulting and Network Design	9,869		1.1	10,223		1.2	(354		)	(3.5	)	Consulting and Network Design	6,485		0.9	9,754		1.2	(3,269)		(33.5)
Total Global Services	115,590		12.9	120,333		14.0	(4,743		)	(3.9	)	Total Global Services	113,726		15.0	106,501		12.8	7,225		6.8

Consolidated revenue	$	894,053	100.0	$	865,011	100.0	$	29,042		3.4		Consolidated revenue	$	757,130	100.0	$	832,912	100.0	$	(75,782)	(9.1)

_____________________________

* Denotes % of total revenue

** Denotes % change from ~~2019~~2020 to ~~2020~~2021

•

~~Networking Platforms segment revenue~~ ~~increased, reflecting a product line sales increase of $30.5 million of our Converged Packet Optical products, partially offset by a product line sales decrease of $9.0 million of our Packet~~ Networking Platforms segment revenue decreased, reflecting product line sales decreases of $79.2 million of our Converged Packet Optical products and $3.2 million of our Routing and Switching products.

◦Converged Packet Optical sales decreased, primarily reflecting sales decreases of $98.4 million of our 6500 Packet-Optical Platform, primarily to communications service providers and cable and multiservice operators, and $41.9 million of our 5400 family of Packet-Optical Platforms primarily to communication service providers. These sales decreases were partially offset by a sales increase of $53.8 million of our Waveserver® products, primarily to communications service providers and Web-scale providers.

◦Routing and Switching sales decreased, primarily reflecting sales decreases of $5.8 million of our 8700 Packetwave Platform to enterprise and government customers and $4.0 million of our 3000 and 5000 families of service delivery and aggregation switches to communication service providers. These decreases were offset by a sales increase of $7.3 million of our platform independent software to a communication service provider.

•Platform Software and Services segment revenue decreased, reflecting a decrease of $8.8 million in software sales. offset by an increase of $6.8 million related to services.

•Blue Planet Automation Software and Servicessegment revenue increased, primarily reflecting an increase of $1.2 million in sales of software platforms. Our entrance into the software automation market is in the early stages and, as such, revenue from our Blue Planet Automation Software platform has not been significant to date and may fluctuate.

•Global Servicessegment revenue increased, reflecting sales increases of $5.8 million of our maintenance support and training services and $4.7 million of our installation and deployment services, offset by a sales decrease of $3.3 million of our consulting and network design services, in part due to impacts of COVID-19 as described above.


◦	Converged Packet Optical sales increased, primarily reflecting an increase of $42.2 million of our Waveserver products primarily to Web-scale providers and cable and multi service operators. This increase was partially offset by a sales decrease of $8.8 million of our 5430 Reconfigurable Switching Systems to communications service providers.

◦

Packet Networking sales decreased, primarily reflecting sales decreases of $11.2 million of our 6500 Packet Transport System (PTS) to communications service providers and $3.4 million of our 8700 Packetwave Platform to communication service providers. These sales decreases were partially offset by a sales increase of $6.1 million of our 3000 and 5000 families of service delivery and aggregation switches to cable and multiservice operators, enterprise customers and Web-scale providers.


•	~~Platform Software and Services~~ ~~segment revenue~~ ~~increased, reflecting increases of $6.1 million in software sales and $3.7 million related to services.~~


•	~~Blue Planet Automation Software and Servicessegment revenue~~ increased, reflecting increases of $1.6 million in software platforms and $1.0 million in software services. Our entrance into the software automation market is in the early stages and, as such, revenue from our Blue Planet Automation Software platform has not been significant to date.


•	~~Global Servicessegment revenue~~ decreased, primarily reflecting a sales decrease of $7.1 million of our installation and deployment services, in part due to impacts of COVID-19 as described above, offset by a sales increase of $2.7 million of our maintenance support and training.

Our operating segments engage in business and operations across three geographic regions: ~~Americas, EMEA~~Americas; EMEA; and APAC. ~~As discussed~~The increase in ~~Note 3, effective~~our EMEA region for the ~~beginning of fiscal 2020,~~quarter ended January 30, 2021 was primarily driven by increased sales in the Netherlands and France. The decrease in our ~~Global Sales and Marketing organization combined~~APAC region for the quarter ended January 30, 2021 was primarily driven by decreased sales in Japan. The decrease in our ~~previous North America and CALA regions into a new~~ Americas region for the quarter ended January 30, 2021 was primarily driven by decreased sales ~~region. The~~in the United States.The following table reflects our geographic distribution of revenue 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):


	Quarter Ended						Increase						Quarter Ended
	May 2, 2020		%*	May 4, 2019		%*	(decrease)			%**			January 30, 2021		%*	February 1, 2020		%*	Increase (decrease)		%**
Americas	$	650,381	72.7	$	615,492	71.1	$	34,889		5.7		Americas	$	496,611	65.6	$	574,004	68.9	$	(77,393)	(13.5)
EMEA	141,431		15.8	114,993		13.3	26,438			23.0		EMEA	155,418		20.5	129,965		15.6	25,453		19.6
APAC	102,241		11.5	134,526		15.6	(32,285		)	(24.0	)	APAC	105,101		13.9	128,943		15.5	(23,842)		(18.5)
Total	$	894,053	100.0	$	865,011	100.0	$	29,042		3.4		Total	$	757,130	100.0	$	832,912	100.0	$	(75,782)	(9.1)

* Denotes % of total revenue

** Denotes % change from ~~2019~~2020 to ~~2020~~2021

•Americas revenue decreased,primarily reflecting sales decreases of $78.5 million within our Networking Platforms segment and $5.7 million within our Platform Software and Services segment, offset by sales increases of $5.1 million within our Global Services segment and $1.7 million within our Blue Planet Automation Software and Services segment. The decrease within our Networking Platforms segment primarily reflects a product line sales decrease of $73.6 million of our Converged Packet Optical products, primarily related to a sales decrease of $77.3 million of our 6500 Packet-Optical Platform to communication service providers.

•

~~Americas revenue~~ ~~increasedprimarily reflecting sales increases of $22.5~~

•EMEA revenue increased,primarilyreflecting sales increases of $19.0 million within our Networking Platforms segment, $3.5 million within our Global Services segment and $2.2 million within our Platform Software and Services segment. The revenue increase within our Networking Platforms segment reflects a product line sales increase of $17.7 million of Converged Packet Optical products, primarily related to a sales increase of $19.9 million of our Waveserver products to communication service providers and Web-scale providers.

•APAC revenue decreased,primarily reflecting a sales decrease of $22.9 million within our Networking Platforms segment, $9.7 million within our Platform Software and Services segment and $4.1 million in our Global Services segment. The increase within our Networking Platforms segment reflects a product line sales increase of $31.9 million of Converged Packet Optical products, primarily related to sales increases of $18.2 million of our Waveserver products and $17.3 million of our 6500 Packet-Optical Platform, partially offset by a decrease of $5.7 million of our 5430 Reconfigurable Switching Systems. Our Waveserver sales increase primarily reflects increased sales to cable and multiservice operators. Our 6500 Packet-Optical Platform sales increase primarily reflects increased sales to government customers, cable and multiservice providers, communications service providers and Web-scale providers, partially offset by decreased sales to enterprise customers. Our 5430 Reconfigurable Switching Systems sales decrease primarily reflects decreased sales to communications service providers.

•

~~EMEA revenue~~ ~~increasedprimarily~~reflecting an increase of $29.1 million within our Networking Platforms segment partially offset by a decrease of $3.8 million in our Global Services segment. The revenue increase within our Networking Platforms segment reflects a product line sales increase of $28.4 million of Converged Packet Optical products, primarily related to sales increases of $16.7 million of our Waveserver products and $13.3 million of our 6500 Packet-Optical Platform, primarily to Web-scale providers.


•	~~APAC revenue~~ ~~decreased~~primarily reflecting decreases of $30.1 million within our Networking Platforms segment and $5.0 million of our Global Services segment, partially offset by sales increases of $3.1 million within our Blue

~~Planet Automation Software and Services~~ segment. Our Networking Platforms segment revenue decrease primarily reflects a decrease of ~~$34.6~~$27.6 million in sales of our 6500 Packet-Optical Platform ~~primarily~~ to communications service providers in ~~India and~~ Japan, partially offset by an increase of ~~$7.4~~7.6 million in sales of our Waveserver products, primarily to ~~Web-scale~~communication service providers.

Cost of Goods Sold and Gross Profit

~~Product~~The component elements that comprise our product cost of goods ~~sold consists primarily of amounts paid to third-party contract manufacturers, component~~and services 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~~are set forth in the “Management’s Discussion and Analysis of ~~direct~~Financial Condition and ~~third-party costs associated with~~Results of Operations” section of our ~~provision~~2020 Annual Report. There are a number 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~~important factors or conditions that can adversely affect or cause our gross profit as a percentage of product or service revenue, or “gross margin,” ~~can~~to fluctuate ~~due to a number of factors, particularly when viewed~~ on a quarterly basis. ~~Our gross margin can fluctuate~~These are similarly described in detail in the “Management’s Discussion and ~~be adversely impacted depending on~~Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of 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 product cost reductions relative to the price erosion that we regularly encounter in our markets. 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 adding capacity or services to 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.2020 Annual 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):


	Quarter Ended						Increase						Quarter Ended
	May 2, 2020		%*	May 4, 2019		%*	(decrease)			%**			January 30, 2021		%*	February 1, 2020		%*	Increase (decrease)		%**
Total revenue	$	894,053	100.0	$	865,011	100.0	$	29,042		3.4		Total revenue	$	757,130	100.0	$	832,912	100.0	$	(75,782)	(9.1)
Total cost of goods sold	480,727		53.8	490,334		56.7	(9,607		)	(2.0	)	Total cost of goods sold	399,239		52.7	462,377		55.5	(63,138)		(13.7)
Gross profit	$	413,326	46.2	$	374,677	43.3	$	38,649		10.3		Gross profit	$	357,891	47.3	$	370,535	44.5	$	(12,644)	(3.4)

* Denotes % of total revenue

** Denotes % change from ~~2019~~2020 to ~~2020~~

2021


	Quarter Ended						Increase						Quarter Ended
	May 2, 2020		%*	May 4, 2019		%*	(decrease)			%**			January 30, 2021		%*	February 1, 2020		%*	Increase (decrease)		%**
Product revenue	$	739,892	100.0	$	710,688	100.0	$	29,204		4.1		Product revenue	$	597,220	100.0	$	687,215	100.0	$	(89,995)	(13.1)
Product cost of goods sold	405,138		54.8	411,050		57.8	(5,912		)	(1.4	)	Product cost of goods sold	315,098		52.8	389,013		56.6	(73,915)		(19.0)
Product gross profit	$	334,754	45.2	$	299,638	42.2	$	35,116		11.7		Product gross profit	$	282,122	47.2	$	298,202	43.4	$	(16,080)	(5.4)

* Denotes % of product revenue

** Denotes % change from ~~2019~~2020 to ~~2020~~2021


	Quarter Ended						Increase						Quarter Ended
	May 2, 2020		%*	May 4, 2019		%*	(decrease)			%**			January 30, 2021		%*	February 1, 2020		%*	Increase (decrease)		%**
Service revenue	$	154,161	100.0	$	154,323	100.0	$	(162	)	(0.1	)	Service revenue	$	159,910	100.0	$	145,697	100.0	$	14,213	9.8
Service cost of goods sold	75,589		49.0	79,284		51.4	(3,695		)	(4.7	)	Service cost of goods sold	84,141		52.6	73,364		50.4	10,777		14.7
Service gross profit	$	78,572	51.0	$	75,039	48.6	$	3,533		4.7		Service gross profit	$	75,769	47.4	$	72,333	49.6	$	3,436	4.8

* Denotes % of services revenue

** Denotes % change from ~~2019~~2020 to ~~2020~~2021

•Gross profit as a percentage of revenue increased, as our gross margin benefited significantly from a favorable mix of customers and products that we believe to be a short-term effect due to COVID-19 related factors. Due to the impact of COVID-19 and related restrictions on sales and marketing activities described in “Overview” above, during the first quarter of fiscal 2021, a higher proportion of our 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, which tend to carry lower margins. We expect our 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.

•

~~Gross profit as a percentage of revenue~~ increased, as our gross margin benefited significantly from a favorable mix of customers and product lines that we believe to be a short-term effect due to COVID-19 related factors, as well as continued improvement in our service margin. Due to the impact of COVID-19 and related restrictions upon sales and marketing activities described in “Overview” above, during the second quarter of fiscal 2020, a higher proportion of our revenue consisted of sales of existing technology to existing customers, as compared to sales to new customers, early stage network deployments for recent design wins, or the introduction of new platforms. Efforts to expand our customer base or market share can adversely affect our gross margin as a result of the more aggressive pricing, commercial concessions and other unfavorable terms often required to be successful within our competitive markets. In recent periods, we have encountered fluctuations in our gross margin as a result of our ongoing strategy to leverage our technology leadership, displace competitors and to capture aggressively additional market share. The resulting mix of revenues from such new wins or early stage deployments during a particular period can adversely impact gross margins. However, the intent of this strategy would be to improve margin in the longer term, as we sell channel cards adding capacity or services to their networks, maintenance services, and other higher margin products over time.

•Gross profit on products as a percentage of product revenue increased, primarily due to a favorable mix of customers and products, as described above, and continued product cost reductions, partially offset by market-based price compression we encountered during the period.

•Gross profit on services as a percentage of services revenue decreased, primarily due to lower installation and deployment margins and a lower mix of higher margin consulting and network design services. The lower margins on installation and deployment services were primarily due to certain customer site readiness delays that caused cost inefficiencies. These lower margins were partially offset by increased higher margin maintenance revenues.


•	~~Gross profit on products as a percentage of product revenue~~ increased, primarily due to a favorable mix of customers and product lines, as described above, and continued product cost reductions, partially offset by market-based price compression we encountered during the period.


•	~~Gross profit on services as a percentage of services revenue~~ increased, primarily due to a higher concentration of revenue from maintenance service contracts with relatively low incremental costs, and fewer early stage network deployment activities due to the impact of COVID-19.

Operating Expense

~~Operating expense consists of the~~The component elements ~~described below.~~that comprise each of our operating expense categories in the table below are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2020 Annual Report.


•	~~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.~~


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


•	~~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 and significant impairments of assets.


•	~~Acquisition and integration costs~~ consist of expenses for financial, legal and accounting advisors, severance and other employee-related costs associated with our acquisitions of DonRiver and Centina, including costs associated with a three-year earn-out arrangement related to the DonRiver acquisition.

During the ~~second~~first quarter of fiscal ~~2020,~~2021, approximately ~~51.0%~~51.9% of our operating expense was non-U.S. Dollar-denominated, including expenses in Canadian Dollars, Indian Rupees and British Pounds. During the ~~second~~first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020, ~~as compared to the second quarter of fiscal 2019,~~ the U.S. Dollar ~~generally strengthened~~fluctuated against these currencies. Consequently, our operating expense reported in U.S. Dollars ~~was reduced~~ slightly increased by approximately ~~$3.5~~$1.4 million, or ~~1.2%~~0.5%, as compared to the ~~second~~first quarter of fiscal ~~2019,~~2020, due to ~~the strengthening U.S. Dollar, net of hedging.~~fluctuations in foreign currency. The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):


	Quarter Ended						Increase						Quarter Ended
	May 2, 2020		%*	May 4, 2019		%*	(decrease)			%**			January 30, 2021		%*	February 1, 2020		%*	Increase (decrease)		%**
Research and development	$	131,530	14.7	$	137,969	15.9	$	(6,439	)	(4.7	)	Research and development	$	132,741	17.5	$	130,900	15.7	$	1,841	1.4
Selling and marketing	101,214		11.3	103,502		12.0	(2,288		)	(2.2	)	Selling and marketing	97,278		12.8	107,066		12.9	(9,788)		(9.1)
General and administrative	42,030		4.7	42,154		4.9	(124		)	(0.3	)	General and administrative	39,993		5.3	42,468		5.1	(2,475)		(5.8)
Amortization of intangible assets	5,839		0.7	5,529		0.6	310			5.6		Amortization of intangible assets	5,910		0.8	5,853		0.7	57		1.0
Significant asset impairments and restructuring costs	3,811		0.4	4,068		0.5	(257		)	(6.3	)	Significant asset impairments and restructuring costs	5,867		0.8	4,472		0.5	1,395		31.2
Acquisition and integration costs	1,414		0.2	1,135		0.1	279			24.6		Acquisition and integration costs	307		—	1,819		0.2	(1,512)		(83.1)
Total operating expenses	$	285,838	32.0	$	294,357	34.0	$	(8,519	)	(2.9	)	Total operating expenses	$	282,096	37.3	$	292,578	35.1	$	(10,482)	(3.6)

* Denotes % of total revenue

** Denotes % change from ~~2019~~2020 to ~~2020~~2021

•Research and development expense increased by $1.8 million. This increase primarily reflects increases in employee and compensation costs and technology-related costs, partially offset by decreases in professional services costs.


•	~~Research and development expense~~ ~~decreased by $6.4 million, primarily reflecting a decrease in professional services.~~


•	~~Selling and marketing expense~~ decreased by $2.3 million, primarily reflecting decreases in travel and entertainment costs due to restrictions on travel and limitations on our interactions with customers as a result of COVID-19. This decrease was partially offset by an increase in employee and compensation cost.


•	~~General and administrative expense~~ ~~remained relatively unchanged.~~

•

~~Amortization of intangible assets~~ ~~slightlyincreased due to additional intangibles acquired in connection with our~~

•Selling and marketing expense was adversely affected by $1.4 million as a result of foreign exchange rates, primarily due to fluctuations of the U.S. Dollar in relation to the Euro. Including the effect of foreign exchange rates, sales and marketing expenses decreased by $9.8 million. This decrease primarily reflects decreases in travel and entertainment costs due to restrictions on travel as a result of COVID-19, and professional services, partially offset by an increase in employee and compensation costs.

•General and administrative expense decreased by $2.5 million primarily as a result of the recovery of bad debt, partially offset by an increase in employee and compensation costs.

•Amortization of intangible assets remained relatively unchanged.

•Significant asset impairments and restructuring costs reflect global workforce reductions as part of a business optimization strategy to improve gross margin and constrain operating expense, and redesign of certain business processes.

•Acquisition and integration costs primarilyreflect reduced acquisition compensation associated with a three-year earn-out arrangement related to the acquisition of DonRiver Holdings, LLC in fiscal 2018 and other fees related to the acquisition of Centina Systems, Inc. in the first quarter of fiscal 2020.


•	~~Significant asset impairments and restructuring costs~~ ~~reflect global workforce reductions as part of a business optimization strategy to improve gross margin, constrain operating expense, and redesign certain business processes.~~


•	~~Acquisition and integration costs~~ ~~primarilyreflect employment-related costs related to our acquisition of DonRiver.~~

Other Items

The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):


	Quarter Ended									Increase						Quarter Ended
	May 2, 2020			%*		May 4, 2019			%*	(decrease)			%**			January 30, 2021		%*	February 1, 2020		%*	Increase (decrease)		%**
Interest and other income (loss), net	$	(2,665	)	(0.3	)	$	(244	)	0.0	$	(2,421	)	992.2		Interest and other income (loss), net	$	(1,121)	(0.1)	$	3,646	0.4	$	(4,767)	(130.7)
Interest expense	$	7,860		0.9		$	9,471		1.1	$	(1,611	)	(17.0	)	Interest expense	$	7,360	1.0	$	8,815	1.1	$	(1,455)	(16.5)
Loss on extinguishment and modification of debt															Loss on extinguishment and modification of debt	$	—	0.0	$	646	0.0	$	(646)	—
Provision for income taxes	$	25,308		2.8		$	17,867		2.1	$	7,441		41.6		Provision for income taxes	$	11,966	1.6	$	9,814	1.2	$	2,152	21.9

* Denotes % of total revenue

** Denotes % change from ~~2019~~2020 to ~~2020~~2021

•Interest and other income (loss), net decreased, primarily reflecting lower interest income due to reduced interest rates on our investments and 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 and other income (loss), net~~ primarily reflects 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 decreased,primarily due to a reduction of LIBOR rates impacting our 2025 Term Loan.

•Loss on extinguishment and modification of debt reflects the refinance of our 2025 Term Loan in the first quarter of fiscal 2020.


•	~~Interest expense~~ ~~decreased,~~Provision for income taxes increased, primarily due ~~to a reduction of LIBOR rates impacting our New 2025 Term Loan.~~


•	~~Provision for income taxes~~ increased, due to higher earnings for the second quarter of fiscal 2020. The effective tax rate for the second quarter of fiscal 2020 was lower compared to the second quarter of fiscal 2019, primarily due to reduced BEAT.

~~Six months ended May 2, 2020 compared~~ to the ~~six~~ ~~months ended May 4, 2019~~

~~Revenue~~

~~During~~BEAT reduction in fiscal 2020 and the effect of the final regulations released on December 2, 2019. Consequently, the effective tax rate for the first ~~six months~~quarter of fiscal 2020, approximately 16.3% of our revenue was non-U.S. Dollar-denominated, including sales in Euros, Japanese Yen, Canadian Dollars, Brazilian Reais, British Pounds, Indian Rupees and United Arab Emirates Dirham. During the first six months of fiscal 2020,2021 increased as compared to the first ~~six months~~quarter of fiscal 2019, the U.S. Dollar generally strengthened against these currencies. Consequently, our revenue reported in U.S. Dollars was reduced by approximately $6.5 million or 0.4%. The table below sets forth the changes in our operating segment revenue for the periods indicated (in thousands, except percentage data):

Six Months Ended Increase
May 2, 2020 %* May 4, 2019 %* (decrease) %**
Revenue:
Networking Platforms
Converged Packet Optical $ 1,245,844
72.1 $ 1,172,835
71.4 73,009
6.2
Packet Networking 131,675
7.6 144,707
8.8 (13,032 ) (9.0 )
Total Networking Platforms 1,377,519
79.7 1,317,542
80.2 59,977
4.6

Platform Software and Services 96,873
5.6 76,827
4.7 20,046
26.1

Blue Planet Automation Software and Services 30,482
1.8 27,447
1.6 3,035
11.1

Global Services
Maintenance Support and Training 133,271
7.8 130,065
7.9 3,206
2.5
Installation and Deployment 69,196
4.0 71,944
4.4 (2,748 ) (3.8 )
Consulting and Network Design 19,624
1.1 19,713
1.2 (89 ) (0.5 )
Total Global Services 222,091
12.9 221,722
13.5 369
0.2

Consolidated revenue $ 1,726,965
100.0 $ 1,643,538
100.0 $ 83,427
5.1

~~_____________________________~~

* Denotes % of total revenue2020.

** Denotes % change from 2019 to 2020


•	~~Networking Platforms segment revenue~~ increased, primarily reflecting a product line sales increase of $73.0 million of our Converged Packet Optical products, partially offset by a product line sales decrease of $13.0 million of our Packet Networking products.

◦

Converged Packet Optical sales increased, reflecting increases of $38.6 million of our 6500 Packet-Optical Platform primarily to government customers, Web-scale providers and cable and multi service operators, $25.5 million of our 5430 Reconfigurable Switching Systems to communications service providers and $6.8 million of our Waveserver products which benefited from increased sales to cable and multiservice operators.

◦

~~Packet Networking sales decreased, primarily reflecting a sales decrease of $25.6 million of our 6500 Packet Transport System (PTS) to communications service providers.~~ ~~These sales decreases were partially offset by a sales increase of $14.2 million of~~ ~~our 3000 and 5000 families of service delivery and aggregation switches to communications service providers, cable and multiservice operators and enterprise customers.~~


•	~~Platform Software and Services segment revenue~~ ~~increased, reflecting an increase of $14.7 million in software sales and $5.3 million primarily related to services to communications service providers.~~


•	~~Blue Planet Automation Software and Servicessegment revenue~~ increased, reflecting an increase of $3.9 million in software services partially offset by a decrease in software sales of $1.0 million. Our entrance into the software automation market is in the early stages and, as such, revenue from our Blue Planet Automation Software platform has not been significant to date.


•	~~Global Services segment revenue~~ ~~slightlyincreased, primarily reflecting a sales increase of $3.2 million of our maintenance support and training offset by a sales decrease of $2.7 million of our installation and deployment services.~~

The following table reflects our geographic distribution of revenue principally based on the relevant location for our delivery of products and performance of services. Our revenue, particularly when considered by geographic distribution, can fluctuate significantly, and the timing of revenue recognition for large network projects, particularly outside of Americas, can result in large variations in geographic revenue results in any particular quarter. The increase in our EMEA region for the six months ended May 2, 2020 was primarily driven by increased sales in the Netherlands, the United Arab Emirates and Germany. The decrease in our APAC region for the six months ended May 2, 2020 was primarily driven by decreased sales in India and Japan, partially offset by increased sales in Singapore and Australia. The table below sets forth the changes in geographic distribution of revenue for the periods indicated (in thousands, except percentage data):

Six Months Ended Increase
May 2, 2020 %* May 4, 2019 %* (decrease) %**
North America $ 1,224,385
70.9 $ 1,131,973
68.8 $ 92,412
8.2
EMEA 271,396
15.7 244,183
14.9 27,213
11.1
APAC 231,184
13.4 267,382
16.3 (36,198 ) (13.5 )
Total $ 1,726,965
100.0 $ 1,643,538
100.0 $ 83,427
5.1

* Denotes % of total revenue

** Denotes % change from 2019 to 2020

•

~~Americas revenue~~ ~~increased,~~primarily reflecting sales increases of $68.7 million within our Networking Platforms segment, $16.9 million within our Platform Software and Services segment and $10.5 million within our Global Services segment. These sales increases were slightly offset by a sales decrease of $3.8 million within our Blue Planet Automation Software and Services segment. Our Networking Platforms segment revenue increase reflects a product line sales increase of $83.3 million of Converged Packet Optical products, partially offset by a decrease of $14.6 million of Packet Networking products. Our Converged Packet Optical revenue increase reflects sales increases of $72.2 million of our 6500 Packet-Optical Platform and $17.9 million of our 5430 Reconfigurable Switching Systems, partially offset by a decrease of $10.5 million of our Waveserver products. Our 6500 Packet-Optical Platform revenue increase primarily reflects increased sales to communications service providers, government customers and cable and multiservice operators. Our 5430 Reconfigurable Switching Systems sales increase primarily reflect increased sales to communications service providers. Waveserver sales reflect decreased sales to Web-scale providers, partially offset by increased sales to cable and multiservice operators.

•

~~EMEA revenue~~ ~~increased,primarily~~reflecting an increase of $31.2 million within our Networking Platforms segment, partially offset by a decrease of $5.2 million within our Global Services segment. Our Networking Platforms segment revenue increase reflects a product line sales increase of $30.3 million of Converged Packet Optical products, primarily related to sales increases of $17.7 million of our 6500 Packet-Optical Platform to Web-scale providers and communications service providers, $8.4 million of our 5430 Reconfigurable Switching Systems to communication service providers and $6.0 million of Waveserver to cable and multiservice operators.

•

~~APAC revenue~~ ~~decreased,~~primarily reflecting decreases of $39.9 million within our Networking Platforms segment and $5.0 million of our Global Services segment. These decreases were partially offset by sales increases of $6.2 million within our Blue Planet Automation Software and Services segment and $2.5 million within our Platform Software and Services segment. Our Networking Platforms segment revenue decrease primarily reflects a decrease of $51.3 million in sales of our 6500 Packet-Optical Platform, primarily to communications service providers in Japan and India, partially offset by an increase of $11.3 million in sales of our Waveserver products primarily to Web-scale providers.

~~Cost of Goods Sold and Gross Profit~~

~~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):~~

Six Months Ended Increase
May 2, 2020 %* May 4, 2019 %* (decrease) %**
Total revenue $ 1,726,965
100.0 $ 1,643,538
100.0 $ 83,427
5.1
Total cost of goods sold 943,104
54.6 945,520
57.5 (2,416 ) (0.3 )
Gross profit $ 783,861
45.4 $ 698,018
42.5 $ 85,843
12.3

* Denotes % of total revenue

** Denotes % change from 2019 to 2020

Six Months Ended Increase
May 2, 2020 %* May 4, 2019 %* (decrease) %**
Product revenue $ 1,427,107
100.0 $ 1,353,220
100.0 $ 73,887
5.5
Product cost of goods sold 794,151
55.6 791,492
58.5 2,659
0.3
Product gross profit $ 632,956
44.4 $ 561,728
41.5 $ 71,228
12.7

* Denotes % of product revenue

** Denotes % change from 2019 to 2020

Six Months Ended Increase
May 2, 2020 %* May 4, 2019 %* (decrease) %**
Service revenue $ 299,858
100.0 $ 290,318
100.0 $ 9,540
3.3
Service cost of goods sold 148,953
49.7 154,028
53.1 (5,075 ) (3.3 )
Service gross profit $ 150,905
50.3 $ 136,290
46.9 $ 14,615
10.7

* Denotes % of services revenue

** Denotes % change from 2019 to 2020


•	~~Gross profit as a percentage of revenue~~ ~~reflects improved product and services gross profit as described below.~~


•	~~Gross profit on products as a percentage of product revenue~~ ~~increased~~, ~~primarily due to a favorable mix of customers and product lines and product cost reductions, partially offset by market-based price compression we encountered during the period.~~


•	~~Gross profit on services as a percentage of services revenue~~ ~~increased, primarily due to higher revenues on maintenance contracts with relatively low incremental costs.~~

~~Operating Expense~~

During the first six months of fiscal 2020, approximately 50.9% of our operating expense was non-U.S. Dollar-denominated, including Canadian Dollars, Indian Rupees, British Pounds, and Euros. Consequently, our operating expense reported in U.S. Dollars was reduced by approximately $3.7 million, or 0.6%, during the first six months of fiscal 2020 as compared to the first six months of fiscal 2019, due to the strengthening U.S. Dollar, net of hedging. The table below sets forth the changes in operating expense for the periods indicated (in thousands, except percentage data):

Six Months Ended Increase
May 2, 2020 %* May 4, 2019 %* (decrease) %**
Research and development $ 262,430
15.2 $ 266,602
16.2 $ (4,172 ) (1.6 )
Selling and marketing 208,280
12.1 201,615
12.3 6,665
3.3
General and administrative 84,498
4.9 81,397
5.0 3,101
3.8
Amortization of intangible assets 11,692
0.7 11,057
0.7 635
5.7
Significant asset impairments and restructuring costs 8,283
0.4 6,341
0.4 1,942
30.6
Acquisition and integration costs 3,233
0.2 2,743
0.2 490
17.9
Total operating expenses $ 578,416
33.5 $ 569,755
34.8 $ 8,661
1.5

* Denotes % of total revenue

** Denotes % change from 2019 to 2020


•	~~Research and development expense~~ ~~decreased by $4.2 million primarily reflecting a decrease in professional services, partially offset by an increase of employee and compensation costs.~~

•

~~Selling and marketing expense~~ benefited by $2.2 million as a result of foreign exchange rates, net of hedging, primarily due to a stronger U.S. Dollar in relation to the Euro and Australian Dollar. Including the effect of foreign exchange rates, net of hedging, sales and marketing expenseincreased by $6.7 million primarily reflecting an increase in employee and compensation costs partially offset by a decrease in travel and entertainment costs due to restrictions on travel as a result of COVID-19.


•	~~General and administrative expense~~ ~~increased by$3.1 million primarily reflecting an increase in bad debt expense and employee and compensation costs.~~


•	~~Amortization of intangible assets~~ ~~increased due to additional intangibles acquired in connection with our acquisition of Centina in the first quarter of fiscal 2020.~~


•	~~Significant asset impairments and restructuring costs~~ ~~reflect global workforce reductions as part of a business optimization strategy to improve gross margin, constrain operating expense, and redesign certain business processes.~~


•	~~Acquisition and integration costs~~ ~~reflect employment-related costs related to our acquisition of DonRiver and legal, employee-related and other costs related to our acquisition of Centina in the first quarter of fiscal 2020.~~

~~Other items~~

~~The table below sets forth the changes in other items for the periods indicated (in thousands, except percentage data):~~

Six Months Ended Increase
May 2, 2020 %* May 4, 2019 %* (decrease) %**
Interest and other income (loss), net $ 981
0.1 $ 4,009
0.2 $ (3,028 ) (75.5 )
Interest expense $ 16,675
1.0 $ 18,912
1.2 $ (2,237 ) (11.8 )
Loss on extinguishment of debt $ 646
— $ —
— $ 646
100.0
Provision for income taxes $ 35,122
2.0 $ 27,006
1.6 $ 8,116
30.1

* Denotes % of total revenue

** Denotes % change from 2019 to 2020


•	~~Interest and other income (loss), net~~ ~~primarily reflects lower interest income due to reduced interest rates on our investments.~~


•	~~Interest expense~~ ~~decreased,primarily due to a reduction of LIBOR rates impacting our 2025 Term Loan.~~


•	~~Loss on extinguishment of debt~~ ~~reflects the refinance of our Old 2025 Term Loan into our New 2025 Term Loan in the first quarter of fiscal 2020.~~


•	~~Provision for income taxes~~ increased, due to higher earnings for the first six months of fiscal 2020. The effective tax rate for the first six months of fiscal 2020 was lower compared to the first six months of fiscal 2019, primarily due to reduced BEAT and the effect of the final regulations released on December 2, 2019.

Segment Profit (Loss)

The table below sets forth the changes in our segment profit (loss) for the respective periods (in thousands, except percentage data):


	Quarter Ended												Quarter Ended
	May 2, 2020			May 4, 2019			Increase (decrease)			%*			January 30, 2021		February 1, 2020		Increase (decrease)		%*
Segment profit (loss):												Segment profit (loss):
Networking Platforms	$	210,987		$	175,191		$	35,796		20.4		Networking Platforms	$	156,431	$	168,270	$	(11,839)	(7.0)
Platform Software and Services	$	21,668		$	12,477		$	9,191		73.7		Platform Software and Services	$	27,660	$	28,951	$	(1,291)	(4.5)
Blue Planet Automation Software and Services	$	(4,399	)	$	(5,941	)	$	1,542		(26.0	)	Blue Planet Automation Software and Services	$	(2,434)	$	(3,113)	$	679	(21.8)
Global Services	$	53,540		$	54,981		$	(1,441	)	(2.6	)	Global Services	$	43,493	$	45,527	$	(2,034)	(4.5)

* Denotes % change from ~~2019~~2020 to ~~2020~~2021


•	•Networking Platforms ~~segment profit~~ ~~increased, primarily due to higher sales volume, higher gross margin as described above and lower research and development costs.~~


•	~~Platform Software and Services segment profit~~ ~~increased, primarily due to higher sales volume as described above.~~


•	~~Blue Planet Automation Software and Servicessegment loss~~ ~~decreased, primarily due to improved gross margin and higher sales volume partially offset by higher research and development costs.~~


•	~~Global Services~~ segment profit decreased, primarily due ~~to lower sales volume slightly offset by improved gross margin, as described above.~~

Six Months Ended
May 2, 2020 May 4, 2019 Increase (decrease) %*
Segment profit:
Networking Platforms $ 379,256
$ 311,782
$ 67,474
21.6
Platform Software and Services $ 50,619
$ 32,940
$ 17,679
53.7
Blue Planet Automation Software and Services $ (7,512 ) $ (7,988 ) $ 476
(6.0 )
Global Services $ 99,068
$ 94,682
$ 4,386
4.6

* Denotes % change from 2019 to ~~2020~~lower sales volume as described above and higher research and development costs, offset by improved gross margin.


•	~~Networking Platforms segment profit~~ ~~increased, primarily due to higher sales volume and higher gross margin as described above~~•Platform Software and Services segment profit decreased, primarily due to lower sales volume as described above, offset by lower research and development costs.


•	~~Platform Software and Services segment profit~~ ~~increased, primarily due to higher sales volume and improved gross margin on product sales, as described above, partially offset by reduced gross margin on software-related services.~~


•	~~Blue Planet Automation Software and Servicessegment loss~~ ~~decreased, primarily due to higher gross margin on software-related services and higher sales volume, partially offset by higher research and development costs and lower gross margin on product sales.~~


•	~~Global Services segment profit~~ ~~increased, primarily due to improved gross margin as described above.~~

•Blue Planet Automation Software and Servicessegment loss decreased, primarily due to higher sales volume and lower research and development costs.

•Global Services segment profit decreased, primarily due to reduced gross margin, as described above.

Liquidity and Capital Resources

Overview. For the ~~six~~three months ended ~~May 2, 2020,~~January 30, 2021, we ~~generated $130.9~~used $7.3 million of cash ~~from~~in operating activities, as our working capital requirements of $127.0 million exceeded our net income (adjusted for non-cash charges) of ~~$323.3 million exceeded our working capital requirements of $192.4~~$119.7 million. For additional details, ~~on our cash provided by operating activities,~~ see ~~the discussion below entitled~~ “Cash ~~Provided By~~Used In Operating ~~Activities.”~~Activities” below.

~~Despite our cash generated from operations, cash,~~Cash, cash equivalents and investments decreased by ~~$35.5~~$38.5 million during the first ~~six~~three months of fiscal ~~2020. The~~2021. In addition to the cash used in operations, the decrease in cash ~~primarily reflects~~also included the following items: (i) cash used to fund our investing activities for capital expenditures totaling ~~$45.5 million,~~$20.9 million; (ii) ~~cash used for the acquisition of Centina of $28.3 million, (iii)~~ cash used for stock repurchases under our stock repurchase program of ~~$74.5 million,~~$12.4 million; and ~~(iv)~~(iii) stock repurchases on vesting of our stock unit awards to employees relating to tax withholding of ~~$18.2~~$19.2 million. ~~Proceeds~~Partially offsetting these decreases in cash were proceeds from the issuance of equity under our employee stock purchase ~~plans~~plan, which provided ~~$12.3~~$13.4 million in cash during the ~~six~~three months ended ~~May 2, 2020.~~January 30, 2021.


	January 30, 2021		October 31, 2020		Increase (decrease)
Cash and cash equivalents	$	1,029,237	$	1,088,624	$	(59,387)
Short-term investments in marketable debt securities	151,434		150,667		767
Long-term investments in marketable debt securities	102,364		82,226		20,138
Total cash and cash equivalents and investments in marketable debt securities	$	1,283,035	$	1,321,517	$	(38,482)

May 2,
2020 November 2,
2019
Increase
(decrease)
Cash and cash equivalents $ 887,732
$ 904,045
$ (16,313 )
Short-term investments in marketable debt securities 100,742
109,940
(9,198 )
Long-term investments in marketable debt securities —
10,014
(10,014 )
Total cash and cash equivalents and investments in marketable debt securities $ 988,474
$ 1,023,999
$ (35,525 )

Principal Sources of Liquidity. Our principal sources of liquidity on hand include our cash, cash equivalents and investments, which as of ~~May 2, 2020~~January 30, 2021 totaled ~~$988.5 million,~~$1.3 billion, as well as the senior secured asset-backed revolving credit facility to which we and certain of our subsidiaries are parties (the “ABL Credit Facility”). The ABL Credit Facility provides for a total commitment of ~~$300~~$300.0 million with a maturity date of October 28, 2024. We principally use the ABL Credit Facility to support the issuance of letters of credit that arise in the ordinary course of our business and thereby to reduce our use of cash

required to collateralize these instruments. As of ~~May 2, 2020,~~January 30, 2021, letters of credit totaling ~~$80.8~~$81.7 million were collateralized by our ABL Credit Facility. There were no borrowings outstanding under the ABL Credit Facility as of ~~May 2, 2020.~~January 30, 2021.

Foreign Liquidity. The amount of cash, cash equivalents, and short-term investments held by our foreign subsidiaries was ~~$81.4~~$94.8 million as of ~~May 2, 2020.~~January 30, 2021. We intend to reinvest indefinitely our foreign earnings. If we were to repatriate the accumulated historical foreign earnings, the estimated amount of unrecognized deferred income tax liability related to foreign withholding taxes would be approximately ~~$27.0~~$25.0 million.

Stock Repurchase Authorization. On December 13, 2018, we announced that the Board of Directors authorized a program to repurchase up to ~~$500~~$500.0 million of its common stock, which replaced in its entirety the previous stock repurchase program authorized in fiscal 2018. In light of the uncertainty surrounding the duration and severity of potential macroeconomic impacts of COVID-19, on March 17, 2020, westock. After temporarily ~~suspended purchases~~suspending repurchases of our common stock ~~under this program.~~ during fiscal 2020, we reinstituted our stock repurchase program in the first quarter of 2021 and are currently targeting repurchases in the range of $150 million of our common stock during fiscal 2021. We repurchased ~~$74.5~~$13.2 million under this program during the first ~~six~~three months of fiscal ~~2020~~,2021, and had ~~$275.4~~$262.2 million remaining under the current authorization as of ~~May 2, 2020.~~January 30, 2021. The ~~reinstatement of the program and~~ amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price and general business and market conditions. The program may be reinstated, modified, suspended, or discontinued at any time.

Liquidity Position. Based on past performance and current expectations, we believe that cash from operations, cash, cash equivalents, investments, and other sources of liquidity, including our ABL Credit Facility, will satisfy our working capital needs, capital expenditures, and other liquidity requirements associated with our operations through at least the next 12 months. We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating or investment plans, and ~~may~~will continue to consider capital raising and other market opportunities that may be available to us. We regularly evaluate alternatives to manage our capital structure and market opportunities to ~~reduce~~enhance our ~~debt.~~liquidity and provide further operational and strategic flexibility. While the COVID-19 pandemic has not materially impacted our liquidity and capital resources to date, it has led to ~~increased disruption~~disruptions and volatility in capital markets and credit markets. The duration and severity of any further economic or market impact of the COVID-19 pandemic remains uncertain and there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets, in the future. Based on past performance and current expectations, we believe that cash from operations, cash, cash equivalents, investments, and other sources of liquidity, including our ABL Credit Facility, will satisfy our working capital needs, capital expenditures, and other liquidity requirements associated with our operations through at least the next 12 months.

Cash ~~Provided By~~Used In Operating Activities

The following sections set forth the components of our ~~$130.9~~$7.3 million of cash ~~provided by~~used in operating activities during the first ~~six~~three months of fiscal ~~2020~~:2021:

Net income (adjusted for non-cash charges)

The following table sets forth our net income (adjusted for non-cash charges) during the period (in thousands):


	Three Months Ended
	January 30, 2021
Net income	$	55,348
Adjustments for non-cash charges:


Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements	23,188
Share-based compensation costs	18,964
Amortization of intangible assets	9,642
Deferred taxes	(905)
Provision for inventory excess and obsolescence	5,905
Provision for warranty	3,239
Other	4,277
Net income (adjusted for non-cash charges)	$	119,658

Six Months Ended
May 2, 2020
Net income $ 153,983
Adjustments for non-cash charges:
Depreciation of equipment, building, furniture and fixtures, and amortization of leasehold improvements 48,381
   Share-based compensation costs 33,579
   Amortization of intangible assets 19,361
   Deferred taxes 25,420
   Provision for inventory excess and obsolescence 12,640
   Provision for warranty 13,793
   Other 16,190
Net income (adjusted for non-cash charges) $ 323,347

Working Capital

We used ~~$192.4~~$127.0 million of cash for working capital during the period. The following table sets forth the major components of the cash used in working capital (in thousands):

Six Months Ended
May 2, 2020
Cash provided by accounts receivable $ 15,865
Cash provided by inventories 5,618
Cash used in prepaid expenses and other (54,839 )
Cash used in accounts payable, accruals and other obligations (151,713 )
Cash used in deferred revenue (5,679 )
Cash used in operating lease assets and liabilities, net (1,669 )
Total cash used for working capital $ (192,417 )


	Three Months Ended
	January 30, 2021
Cash provided by accounts receivable	$	18,862
Cash used in inventories	(51,020)
Cash used in prepaid expenses and other	(13,835)
Cash used in accounts payable, accruals and other obligations	(112,170)
Cash provided by deferred revenue	31,917
Cash used in operating lease assets and liabilities, net	(731)
Total cash used for working capital	$	(126,977)

As compared to the end of fiscal ~~2019:~~2020:

•The ~~$15.9~~$18.9 million of cash provided by accounts receivable during the first ~~six~~three months of fiscal ~~2020~~2021 reflects increased cash collections;

•The ~~$5.6~~$51.0 million of cash ~~provided by inventory~~used in inventories during the first ~~six~~three months of fiscal ~~2020~~2021 primarily reflects ~~lower~~increases in finished ~~goods. During~~goods to meet customer delivery schedules and related to some of the ~~second quarter of~~actions that we have taken since early fiscal 2020 ~~we experienced temporary closures~~to mitigate the risk of ~~certain third-party facilities, reduced operation levels or capacity, lead time extensions for certain parts and component supply delays within our~~adverse supply chain ~~as a result of various~~impact on our business and operations due to COVID-19 ~~safety countermeasures implemented globally;~~related disruptions;

•The ~~$54.8~~$13.8 million of cash used in prepaid expense and other during the first ~~six~~three months of fiscal ~~2020~~2021 primarily reflects increases in ~~upfront future discounts paid to customers~~foreign currency forward contracts and higher non-customer receivables;

•The ~~$151.7~~$112.2 million of cash used in accounts payable, accruals and other obligations during the first ~~six~~three months of fiscal ~~2020~~2021 primarily reflects the ~~timing of payments for bonuses~~payment to employees under our annual cash incentive compensation plan ~~and~~in the first quarter, as well as inventory purchases;

•The ~~$5.7~~$31.9 million of cash ~~used in~~provided by deferred revenue during the first ~~six~~three months of fiscal ~~2020~~2021 represents ~~a decrease~~an increase in advanced payments received from customers prior to revenue recognition; and

•

~~The $1.7 million of cash used in operating lease assets and liabilities, net, during the first six months of fiscal 2020 represents cash paid for operating leases. For more details, see Note~~ 15

•The $0.7 million of cash used in operating lease assets and liabilities, net, during the first three months of fiscal 2021 represents cash paid for operating leases. For more details, see Note 14 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Our days sales outstanding (“DSOs”) for the first ~~six~~three months of fiscal ~~2020~~2021 were 8193 days, and our inventory turns for the first ~~six~~three months of fiscal ~~2020~~2021 were ~~4.9.~~3.2. The calculation of DSOs includes accounts receivables, net and contract assets for unbilled receivables, net included in prepaid expenses and other.

Cash Paid for Interest

The following table sets forth the cash paid for interest during the period (in thousands):

Six Months Ended
May 2, 2020
Term Loan due September 28, 2025 (Old) ⁽¹⁾
$ 6,691
Term Loan due September 28, 2025 (New) ⁽²⁾
5,241
Interest rate swaps⁽³⁾
2,462
ABL Credit Facility⁽⁴⁾
779
Finance leases 2,417
Cash paid during period $ 17,590


	Three Months Ended
	January 30, 2021

Term Loan due September 28, 2025(1)	3,341
Interest rate swaps(2)	2,511
ABL Credit Facility(3)	494
Finance leases	1,220
Cash paid during period	$	7,566

(1) Interest on the Old 2025 Term Loan was payable periodically based on the interest period selected for borrowing. The Old 2025 Term Loan bore interest at LIBOR for the chosen borrowing period plus a spread of 2.00% subject to a minimum LIBOR rate of 0.00%. On January 23, 2020, we refinanced and replaced this term loan with the New 2025 Term Loan. See Note 16 to our Condensed Consolidated Financial Statements included in Item I of Part I of this report for more information.

⁽²⁾~~Interest on the New~~ 2025 Term Loan is payable periodically based on the interest period selected for borrowing. The ~~New~~ 2025 Term Loan bears interest at LIBOR for the chosen borrowing period plus a spread of 1.75% subject to a minimum LIBOR rate of 0.00%. At the end of the ~~second~~first quarter of fiscal ~~2020,~~2021, the interest rate on the ~~New~~ 2025 Term Loan was ~~2.47%~~1.88%.

⁽³⁾(2) The interest rate swaps fix the LIBOR rate for $350.0 million of the ~~New~~ 2025 Term Loan at 2.957% through September 2023.

⁽⁴⁾(3) During the first ~~six~~three months of fiscal ~~2020,~~2021, we utilized the ABL Credit Facility to collateralize certain standby letters of credit and paid ~~$0.8~~$0.5 million in commitment fees, interest expense and other administrative charges relating to the ABL Credit Facility.

Contractual Obligations

There have been no material changes to our contractual obligations since ~~November 2, 2019.~~October 31, 2020. For a summary of our contractual obligations, see Item 7 of Part II of our ~~2019~~2020 Annual Report.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any equity interests in so-called limited purpose entities, which include special purpose entities (SPEs) and structured finance entities.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we reevaluate our estimates, including those related to revenue recognition, share-based compensation, bad debts, inventories, intangible and other long-lived assets, goodwill, income taxes, warranty obligations, restructuring, derivatives and hedging, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The inputs into certain of our judgments, assumptions, and estimates ~~reflected~~reflect, among other things, the information available to us regarding the economic implications of the COVID-19 pandemic, and expectations as to its impact on our business and on our critical and significant accounting estimates. Among other things, these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. To the extent that there are material differences between our estimates and actual results, our consolidated financial statements will be affected. In addition, asbecause the duration, severity, and ~~severity~~impact of the COVID-19 pandemic ~~are~~remain uncertain, certain of our estimates could require further judgment or modification, and therefore carry a higher degree of variability and volatility. As events continue to evolve, our estimates may change materially in future periods.

~~Our~~Except for items listed below, our critical accounting policies and estimates have not changed materially since ~~November 2, 2019, except for items listed below.~~October 31, 2020. For a discussion of our critical accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our ~~2019~~2020 Annual Report.

~~Leases~~Allowance for Credit Losses for Accounts Receivable and Contract Assets

~~For our lease accounting policies due to ASC 842, see Notes~~See Note 2 ~~and 15~~ to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this ~~report.~~report for information regarding the change in our allowance for credit losses for accounts receivable and contract assets accounting policies as a result of our adoption of ASU 2016-13, Financial Instruments - Credit Losses.

Effects of Recent Accounting Pronouncements

See Note 2 to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report for information relating to our discussion of the effects of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. For a discussion of quantitative and qualitative disclosures about market risk, see Item 7A of Part II of ~~the 2019~~our 2020 Annual Report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any significant impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. The design of our processes and controls allow for remote execution with secure accessibility to data. We are continually monitoring and assessing the COVID-19 situation to minimize the impact, if any, on the design and operating effectiveness on our internal controls.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under the heading “Litigation” in Note ~~21,~~20, Commitments and Contingencies, to our Condensed Consolidated Financial Statements included in Item 1 of Part I of this report, is incorporated herein by reference.

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the information contained in this report and in our ~~2019~~2020 Annual Report, including the risk factors identified in Item 1A of Part I thereof (Risk Factors). This report contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” above. Our actual results could differ materially from those contained in the forward-looking statements. Any of the risks discussed in our ~~2019~~2020 Annual Report, in this report, in other reports we file with the SEC, and other risks we have not anticipated or discussed, could have a material adverse impact on our business, financial condition or results of operations. Except as set forth below, there has been no material change to our Risk Factors from those presented in our ~~2019~~2020 Annual Report.

Our reliance on third-party component suppliers, including sole and limited source suppliers, exposes our business to additional risk 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 ~~COVID-19 pandemic has impacted~~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 and could negatively affect our product gross margin and results of ~~operation~~operations. 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 can be expected in the future to result in, increased market demand for key raw materials or components upon which we rely. By way of example, due to increased demand across a range of industries, the global supply market for semiconductor components, which we use in most of our products, has experienced significant strain in recent periods. Partly in response to these dynamics, in February 2021, the Biden Administration issued an executive order on U.S. supply chains, implementing a 100-day review of certain supply chain risks, including with respect to semiconductor manufacturing and advanced packaging supply chains. 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, product allocation challenges, deployment delays and increased cost, lead times and delivery cycle time lines. These and other industry, market and regulatory disruptions and challenges affecting our suppliers could ~~have a material adverse effect on~~expose our business to increased costs, loss or lack of supply, or discontinuation of components, lost revenue, increased lead times and deployment delays that could harm our business, results of operations and ~~financial condition in the future.~~

On January 30, 2020, the WHO declared a global emergency due to the outbreak of COVID-19, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic. Unprecedented actions have been taken by governments globally to try to contain the pandemic, such as travel bans and restrictions, business closures, social distancing measures, quarantines and shelter-in-place orders. This pandemic and these countermeasures to contain the virus have caused economic and financial disruptions globally, including in most of the regions in which we sell our products and services and conduct our business operations. In the second quarter of fiscal 2020, the COVID-19 pandemic adversely impacted our financial results and business operations, primarily due to supply chain disruptions, limitations on customer fulfillment activity and our level of success in obtaining new customers or selling into recent customer design wins on their original timelines. The magnitude and duration of disruption from the COVID-19 pandemic, and its impact on global business activity and our business and operations remains uncertain and could worsen.

As a result of the COVID-19 pandemic, we have temporarily closed Ciena offices globally, implemented travel restrictions and withdrawn from industry events. Our transition from existing flexible working arrangements to a work from home policy for most of our employees could impact the ability of our employees to advance research and development projects as efficiently or productively as they could in a lab environment or office setting. The extent and duration of ongoing workplace restrictions and limitations could adversely impact our ability to continue to push the pace of innovation in our industry. Continued restrictions on travel and limitations on interaction with customers, such as field and lab trials, may impact our sales and marketing activities, including our ability to secure new customers, to qualify and sell new products, or to grow sales with customers where or with whom we do not have a longer-standing supply relationship, such as within international markets and for our Blue Planet Automation Software & Services segment and our Packet Networking product line.

Also as a result of the COVID-19 pandemic, we have experienced some disruption and delays in our global supply chain and related operations. We rely on third-party manufacturing operations in Mexico, Thailand, the United States and Canada. We also rely on a global component supply network involving many vendors and countries throughout the world. During the second quarter of fiscal 2020, some of our component suppliers – particularly those with facilities in China and Malaysia – experienced challenges related to COVID-19 that resulted in temporary closures or reductions of supply capacity. Such disruptions may continue, or worsen, in the future. Limits on manufacturing availability or capacity, or delays in production or delivery of components or raw materials, due to COVID-related restrictions could delay or inhibit our ability to obtain supply of components and produce finished goods. If the COVID-19 pandemic worsens, it could also result in further disruptions or restrictions on our ability to source, manufacture or distribute our products, including temporary closures of our key manufacturing facilities, or the facilities of our suppliers and their manufacturers. If we experience more pronounced disruptions in our operations, we may experience constrained supply that may materially adversely impact our business and results of operations in future periods.

We have experienced some disruption in our ability to provide installation, professional and fulfillment services to customers due to site access limitations, limited customer availability, project delays or re-prioritization by customers, and travel bans or restrictions on movement or gatherings, which adversely impacted revenue. We have also experienced transportation disruptions, such as reduced availability of air transport, port closures, and increased border controls or closures. If any of these logistics or transportation disruptions persist or worsen, our operations and ability to meet customer demand could be materially adversely affected. 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.

During the second quarter of fiscal 2020, we experienced higher than typical orders for our products and services among a concentrated set of larger customers with whom we have existing positions as a supplier. We believe some portion of these orders likely reflects short-term purchasing behaviors based on customer-specific considerations in the face of the pandemic, including: customer concerns about future continued availability of supply; implementation of customer business continuity actions; our desire for increased visibility into expected demand; customer consumption of existing inventory or spare equipment; additional network capacity requirements; acceleration of capital spending; and, possibly, increased bandwidth demands being placed on networks due to the pandemic. This level of orders may not continue in future periods and could decline. In addition, as our customers and their customers 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.

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, which has adversely affected our operating results. Macroeconomic and market conditions could be adversely affected by a variety of political, economic or other factors, including long-term factors emerging from the effects of the pandemic in the United States and international markets, which 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, and the increasing concentration of our customers experienced in the second quarter of fiscal 2020, 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.

The COVID-19 pandemic has also led to increased disruption and volatility in capital markets and credit markets. The pandemic and resulting economic uncertainty could adversely affect our liquidity and capital resources in the future. While the COVID-19 pandemic has not materially impacted our liquidity and capital resources to date, it has led to increased disruption and volatility in capital markets and credit markets. The duration and severity of any further economic or market impact of the COVID-19 pandemic remains uncertain and there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets, in the future. The inputs into certain of our judgments,

assumptions, and estimates considered the economic implications of the COVID-19 pandemic on our critical and significant accounting estimates. The actual results that we experience may differ materially from our estimates. As the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve, our estimates may change materially in future periods. In addition, if COVID-19 impacts the financial position of our customers or 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, including disruption caused by the COVID-19 pandemic, 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.

The situation relating to the COVID-19 pandemic and its potential effects on our business remains dynamic, including in our third quarter of fiscal 2020 and thereafter. The broader implications for our business and results of operations remain uncertain and will depend on many factors outside our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy and enterprise and consumer behaviors. If these and other effects of the COVID-19 pandemic, including its effect on broader economies, financial markets and overall demand environment for our products, continues or worsens, it could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

The COVID-19 pandemic may also increase the likelihood and severity of other risks discussed in in Item 1A of Part I of our 2019 Annual Report, including but not limited to risks related to competition, development of the market for and demand for our products, delays in the development and production of our products, reliance on third parties, our international scale, our exposure to currency exchange rate fluctuations and the credit risks of our customers and resellers, and volatility in the capital markets.

~~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, acts of war or terrorism, and epidemics, 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.~~relationships.

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. 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 the future”~~ ~~for additional factors related to COVID-19 that could cause our revenue, gross margin and operating results to fluctuate.~~

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 59.3% of our fiscal 2019 revenue, and we have seen a further concentration in our orders during the second quarter of fiscal 2020. Historically, our largest customers by revenue principally consisted of large communications service providers. For example, Verizon and AT&T accounted for approximately 12.9% and 10.9% of fiscal 2019 revenue, respectively. 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 2019, three Web-scale providers were among our top ten customers. Web-scale customers have been important contributors to our overall growth 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.

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, with whom we experienced declines in annual revenue during fiscal 2017 and fiscal 2018, 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. Similarly, certain of our largest Web-scale customers have announced an intention to reduce capital spending in future periods and we expect our revenue from this customer segment to moderate from the level achieved in fiscal 2019. Web-scale providers are also under consumer and government scrutiny and have been the subject of regulatory and other government actions, including antitrust investigations. 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. 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.

In addition, the negative effects of the COVID-19 pandemic on global economic conditions may affect the network spending, procurement strategies, or business practices of our largest customers. For example, our service provider customers rely in part upon the sale of services to consumers and enterprises, including those in the retail, entertainment, and travel industries, which have been acutely impacted by the negative economic effects of the COVID-19 pandemic. Similarly, certain of our Web-scale customers have business models that heavily rely upon advertising revenue from enterprises, including those in industries acutely affected by the COVID-19 pandemic. If any of our large customers experience a loss in revenue due to the impact of COVID-19 on their consumer or enterprise customers, they may reduce capital spending generally or with respect to our products, which could materially adversely affect our business and results of operations.

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, which has adversely affected our operating results. The current global macroeconomic environment is challenging and volatile, and is being significantly and adversely impacted by the COVID-19 pandemic. 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, which 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; and~~

~~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 the macroeconomic and market conditions created by COVID-19 may 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.

~~COVID-19-related restrictions on travel and gatherings could adversely impact our ability to compete for business, particularly with customers where we are not an incumbent supplier.~~

Competition for sales of communications networking equipment, software and services is intense on a global basis, as we and our competitors aggressively seek to capture market share and displace incumbent equipment vendors. Our strategy is to leverage our technology leadership and to aggressively capture additional market share and displace competitors, particularly with communications service providers internationally. This market share capture has been an important contributor to our growth in recent years. Restrictions on travel and gatherings due to COVID-19 countermeasures have impacted our interaction with customers, and the timing of certain field and lab trials. Restrictions have impacted and may continue to impact our ability to carry out certain sales and marketing activities, and adversely impacted 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 Packet Networking product line. If we fail to win new business or to compete successfully in our markets, our business and results of operations could suffer.

Investment of research and development resources in communications networking technologies for which there is not an adequate market demand, or failure to sufficiently or timely invest 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, including our Blue Planet Automation Software and Services, 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 relationships with customers.

Restrictions on the ability of our research and development employees to work in our facilities as a result of restrictions imposed by governments or us to combat the COVID-19 pandemic could reduce their effectiveness including, for example, by making it more difficult for them to collaborate as effectively in the development of new solutions. 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 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 with Mexico, Thailand, the United States and Canada 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 U.S. 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.~~

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 the future”~~ ~~for additional factors related to COVID-19 and our third-party contract manufacturers that could adversely affect our business and financial results.~~

~~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, acts of war or terrorism, and epidemics, including the COVID-19 pandemic.~~

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 EU General Data Protection Regulation, 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 ensure 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.

~~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 we may experience difficulty retaining and motivating existing employees and attracting qualified personnel to fill key positions. 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, 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 and entry permits in order to legally work in the United States and other countries. Global events such as pandemics may interfere with our ability to hire or retain personnel who require these visas or entry permits. For example, in response to the COVID-19 pandemic, the United States has recently suspended entry of foreign nationals who have recently been in China, the United Kingdom, numerous countries within the European Union, and other countries into the United States, which could impact our ability to attract, develop, integrate and retain highly skilled employees with appropriate qualifications from other countries. In addition, on April 22, 2020, in a stated effort to protect Americans from competition from foreign workers during the COVID-19 pandemic, the U.S. President signed an executive order to pause the issuance of green cards for 60 days.

~~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 subject 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, subject 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 cyber-attacks or security breaches. We have been subjected in the past 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. While these have not had a material effect on our business or our network security to date, security incidents involving access 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.

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, the U.S. government has threatened to undertake a number of actions relating to trade with Mexico, including the closure of the border and the imposition of escalating tariffs on goods imported into the U.S. from Mexico. A substantial portion of our products are manufactured and distributed by third-party contract manufacturers in Mexico. If adopted, such actions could adversely impact our business and significantly disrupt our operations. These actions may also make our products less competitive in the United States and other markets. In addition, the U.S. government reached a new trade agreement with the Canadian and Mexican governments to replace the North American Free Trade Agreement (“NAFTA”) with the United States-Mexico-Canada Agreement (“USMCA”). There can be no assurance that a transition from NAFTA to the USMCA would not adversely impact our business or disrupt our operations.

In addition, as a result of our global sourcing strategy, 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. Effective September 1, 2019, a new 15% tariff was imposed on approximately $120 billion of China-origin imports covered by the so called “List 4A,” which includes certain of our products. In December 2019, the U.S. government announced that as part of a so called “Phase One” agreement between the U.S. and China on trade matters, this tariff was expected to be reduced to 7.5%. 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. 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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides a summary of repurchases of our common stock during the ~~second~~first quarter of fiscal ~~2020:~~2021:

Period
Total Number of Shares Purchased ⁽¹⁾
Average Price Paid Per Share
Total 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)
February 2, 2020 to February 29, 2020 344,079
$ 42.31
344,079
$ 284,664
March 1, 2020 to March 28, 2020 240,256
$ 38.60
240,256
$ 275,389
March 29, 2020 to May 2, 2020 —
$ —
—
$ 275,389
584,335
$ 40.78
584,335


Period	Total Number of Shares Purchase (1)	Average Price Paid Per Share		Total 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)
November 1, 2020 to November 28, 2020	—	$	—	—	$	275,388
November 29, 2020 to December 26, 2020	73,430	$	50.42	73,430	$	271,686
December 27, 2020 to January 30, 2021	178,148	$	53.34	178,148	$	262,183
	251,578	$	52.49	251,578

(1)On December 13, 2018, we announced that our Board of Directors authorized a program to repurchase up to ~~$500~~$500.0 million of our common stock. ~~Due to the continued uncertainty surrounding the duration and severity of potential macroeconomic impacts of COVID-19, Ciena considered it prudent to~~After temporarily ~~suspend purchases~~suspending repurchases of our common stock ~~under~~during fiscal 2020, we reinstituted our stock repurchase program ~~effective as~~in the first quarter of ~~March 17, 2020.~~2021. The ~~reinstatement of the program and~~ amount and timing of repurchases are subject to a variety of factors including liquidity, cash flow, stock price and general business and market conditions. The program may be ~~reinstated,~~ modified, suspended, or discontinued at any time.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits











10.1			~~Amendment to~~ Ciena Corporation ~~2017 Omnibus~~ Incentive Bonus Plan, (Incorporated by reference from Exhibit 10.1 of Ciena’s Current Report on Form 8-K, filed with the SEC on April 6, 2020).as amended and restated February 23, 2021
31.1			Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*
*			Represents management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ciena Corporation

Date:

~~June~~March 10, ~~2020~~2021

By:

/s/ Gary B. Smith

Gary B. Smith

President, Chief Executive Officer

and Director

(Duly Authorized Officer)

Date:

~~June~~March 10, ~~2020~~2021

By:

/s/ James E. Moylan, Jr.

James E. Moylan, Jr.

Senior Vice President, Finance and

Chief Financial Officer

(Principal Financial Officer)

5739



	May 2, 2020			November 2, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	887,732		$	904,045
Short-term investments	100,742			109,940
Accounts receivable, net of allowance for doubtful accounts of $10.4 million and $20.1 million as of May 2, 2020 and November 2, 2019, respectively.	693,963			724,854
Inventories, net	325,753			345,049
Prepaid expenses and other	332,021			297,914
Total current assets	2,340,211			2,381,802
Long-term investments	—			10,014
Equipment, building, furniture and fixtures, net	260,867			286,884
Operating right-of-use assets	47,864			—
Goodwill	310,269			297,937
Other intangible assets, net	115,536			112,781
Deferred tax asset, net	689,416			714,942
Other long-term assets	92,599			88,986
Total assets	$	3,856,762		$	3,893,346
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	292,164		$	344,819
Accrued liabilities and other short-term obligations	288,773			382,740
Deferred revenue	107,023			111,381
Operating lease liabilities	18,096			—
Current portion of long-term debt	6,930			7,000
Total current liabilities	712,986			845,940
Long-term deferred revenue	42,894			45,492
Other long-term obligations	129,850			148,747
Long-term operating lease liabilities	51,100			—
Long-term debt, net	679,356			680,406
Total liabilities	$	1,616,186		$	1,720,585
Commitments and contingencies (Note 21)
Stockholders’ equity:
Preferred stock – par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding	—			—
Common stock – par value $0.01; 290,000,000 shares authorized; 153,641,565 and 154,403,850 shares issued and outstanding	1,536			1,544
Additional paid-in capital	6,790,856			6,837,714
Accumulated other comprehensive loss	(61,386		)	(22,084		)
Accumulated deficit	(4,490,430		)	(4,644,413		)
Total stockholders’ equity	2,240,576			2,172,761
Total liabilities and stockholders’ equity	$	3,856,762		$	3,893,346



	Balance at November 2, 2019		New Lease Accounting Standard				Adjusted Balance at November 3, 2019
ASSETS:
Operating right-of-use assets	$	—	$	53,334		⁽¹⁾	$	53,334

Total assets	$	3,893,346	$	53,334			$	3,946,680

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Accrued liabilities and other short-term obligations	$	382,740	$	(1,484	)	⁽²⁾	$	381,256
Short-term lease liabilities	$	—	20,498			⁽³⁾	$	20,498
Other long-term obligations	$	148,747	(21,244		)	⁽⁴⁾	$	127,503
Long-term operating lease liabilities	$	—	55,564			⁽⁵⁾	$	55,564

Total liabilities and stockholders’ equity	$	3,893,346	$	53,334			$	3,946,680



	Quarter Ended May 4, 2019
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	623,838	$	—	$	—	$	—	$	623,838
Packet Networking	73,138		—		—		—		73,138
Platform Software and Services	—		35,229		—		—		35,229
Blue Planet Automation Software and Services	—		—		12,473		—		12,473
Maintenance Support and Training	—		—		—		68,788		68,788
Installation and Deployment	—		—		—		41,322		41,322
Consulting and Network Design	—		—		—		10,223		10,223
Total revenue by product line	$	696,976	$	35,229	$	12,473	$	120,333	$	865,011

Timing of revenue recognition:
Products and services at a point in time	$	696,976	$	11,101	$	3,047	$	5,575	$	716,699
Services transferred over time	—		24,128		9,426		114,758		148,312
Total revenue by timing of revenue recognition	$	696,976	$	35,229	$	12,473	$	120,333	$	865,011



	Six Months Ended May 2, 2020
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	1,245,844		$	—	$	—	$	—	$	1,245,844
Packet Networking	131,675		—		—		—		131,675
Platform Software and Services	—		96,873		—		—		96,873
Blue Planet Automation Software and Services	—		—		30,482		—		30,482
Maintenance Support and Training	—		—		—		133,271		133,271
Installation and Deployment	—		—		—		69,196		69,196
Consulting and Network Design	—		—		—		19,624		19,624
Total revenue by product line	$	1,377,519	$	96,873	$	30,482	$	222,091	$	1,726,965

Timing of revenue recognition:
Products and services at a point in time	$	1,377,518	$	30,092	$	8,482	$	8,874	$	1,424,966
Services transferred over time	—		66,781		22,001		213,217		301,999
Total revenue by timing of revenue recognition	$	1,377,518	$	96,873	$	30,483	$	222,091	$	1,726,965



	Six Months Ended May 4, 2019
	Networking Platforms		Platform Software and Services		Blue Planet Automation Software and Services		Global Services		Total
Product lines:
Converged Packet Optical	$	1,172,835	$	—	$	—	$	—	$	1,172,835
Packet Networking	144,707		—		—		—		144,707
Platform Software and Services	—		76,827		—		—		76,827
Blue Planet Automation Software and Services	—		—		27,447		—		27,447
Maintenance Support and Training	—		—		—		130,065		130,065
Installation and Deployment	—		—		—		71,944		71,944
Consulting and Network Design	—		—		—		19,713		19,713
Total revenue by product line	$	1,317,542	$	76,827	$	27,447	$	221,722	$	1,643,538

Timing of revenue recognition:
Products and services at a point in time	$	1,317,542	$	27,145	$	9,275	$	9,141	$	1,363,103
Services transferred over time	—		49,682		18,172		212,581		280,435
Total revenue by timing of revenue recognition	$	1,317,542	$	76,827	$	27,447	$	221,722	$	1,643,538



	Amount
Cash and cash equivalents	$	5,718
Accounts receivable	610
Prepaid expenses and other	536
Equipment, furniture and fixtures	17
Goodwill	13,055
Customer relationships and contracts	400
Developed technology	22,200
Accounts payable	(47		)
Accrued liabilities	(286		)
Deferred revenue	(1,493		)
Deferred tax liability	(6,692		)
Total purchase consideration	$	34,018



	November 2, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government obligations:
Included in short-term investments	$	109,715	$	225	$	—		$	109,940
Included in long-term investments	10,017		—		(3		)	10,014
	$	119,732	$	225	$	(3	)	$	119,954



	Classification	As of May 2, 2020
Operating leases:
Operating ROU Assets	Operating right-of-use assets	$	47,864
Operating lease liabilities	Operating lease liabilities and Long-term operating lease liabilities	69,196
Finance leases:
Buildings, gross	Equipment, building, furniture and fixtures, net	$	66,931
Less: accumulated depreciation	Equipment, building, furniture and fixtures, net	(14,734		)
Buildings, net		$	52,197
Finance lease liabilities	Accrued liabilities and other short-term obligations and other long-term obligations	$	62,152



	Six Months Ended
	May 2, 2020
Term Loan due September 28, 2025 (Old) ⁽¹⁾	$	6,691
Term Loan due September 28, 2025 (New) ⁽²⁾	5,241
Interest rate swaps⁽³⁾	2,462
ABL Credit Facility⁽⁴⁾	779
Finance leases	2,417
Cash paid during period	$	17,590



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share		Total 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)
February 2, 2020 to February 29, 2020	344,079	$	42.31	344,079	$	284,664
March 1, 2020 to March 28, 2020	240,256	$	38.60	240,256	$	275,389
March 29, 2020 to May 2, 2020	—	$	—	—	$	275,389
	584,335	$	40.78	584,335