Transcript CIENA Corporate Template - Corporate-ir

JP Morgan 32nd Annual Technology
& Telecom Conference
CIENA: Beyond Optical
Tom Mock
Vice President, Strategic Planning
May 5, 2004
Forward-Looking Statements
This presentation may contain “forward-looking statements.” These
statements are based on our expectations and are naturally subject to
uncertainty and changes in circumstances. Actual results could vary
materially from these expectations. More detailed information about the
risks involved in investing in CIENA’s stock are set forth in CIENA’s
Quarterly Report on Form 10-Q for the quarter ended January 31,
2004. CIENA is under no obligation (and expressly disclaims any such
obligation) to update or alter its forward-looking statements, whether as
a result of new information, future events or otherwise.
2
Agenda
• Where we were
• What changed?
• CIENA: Beyond optical
• CIENA’s Transformation: Beyond the product
portfolio
3
CIENA Led the Optical Core Revolution
Success driven by disruptive economics
Core Network
Long Haul DWDM Transport
Core Optical Switching
$50
CoreStream™
600
500
400
300
99%
200
43%
$25
16%
36%
100
$5
0
CAPEX
CoreDirector™
$ Millions
Capex $ / Mbps
Gb/s
700
1996 - 2000
Acq’d Lightera,
January, 1999
4
Traditional
CIENA
CAPEX
OPEX REVENUE
2000 - 2003
CIENA’s Optical Portfolio Expansion
Core Network
Access Network
Metro Network
CoreStream™
ONLINE™ Metro
CoreDirector™
Acq’d Cyras
Dec 2000
Acq’d ONI
June 2002
MetroDirector
K2™
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ONLINE Edge
Core Optical Market is in Decline
…and spending has shifted
to service delivery
The Operators’ “pain point”
has moved…
Relative cost
of equipment
$650 / Mbps
$18 / Mbps
$650 / Mbps
Alpharetta
Linthicum
•
The core is no longer the primary
challenge.
•
Carriers shifting emphasis from
CAPEX/OPEX reduction to top-line
growth.
•
Protecting voice revenues remains
a priority.
•
Service providers looking for
strategic partners to deliver
profitable broadband services
originating from the edge.
Carrier Spend ($M)
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$2002
2003
2004
Core & Infrastructure
2005
2006
Service Delivery
Source: Infonetics, Dell’Oro, CIENA Internal Estimates
6
Network Philosophy
Capture revenues by increasing service bundle
Converge functionality to reduce CAPEX
Control network to reduce OPEX
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Capturing Services Revenue
Core Network
Access Network
Metro Network
VoD/HDTV
Services
CoreStream™
An intelligent optical core enables an allservice network, but CIENA’s portfolio
lacked service delivery platforms
customers needed to capture new
revenue growth
Voice/video/
DSL Services
MPLS/ATM/FR
Services
IP
Services
Storage
Services
ONLINE™ Metro
CoreDirector™
Ethernet
Services
Private Line
Services
MetroDirector
K2™
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ONLINE Edge
CIENA’s Acquisition/Partnership Goals
1. Expand addressable market with service
delivery platforms
2. Leverage core leadership/strengths
3. Leverage customer base/relationships
4. Improve CIENA’s business model
–
Drive revenue growth
–
Improve gross margins
–
Push toward sustained profitability
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Preserve the Core; Expand Service
Portfolio
Video on Demand
Ethernet
Storage
IP VPNs
Internet
Access
HDTV
Private
Lines
VoIP
DSL
• Protect brand and customer base by continuing investment in the core
at reduced levels
• Diversify into service delivery with a coherent portfolio
• Target underserved, high growth segments that leverage CIENA’s
brand and customer equity
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Disciplined Acquisition Strategy
Candidates should:
– Be disruptive to existing network economics
– Fit with CIENA’s network vision
– Have adjacency (via customer or technology)
– Deliver good margin profile
– Have channel fit or provide new channel
– Have visible path to #3+ market share in growth
market
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Capturing Services Revenue
Core Network
Access Network
Metro Network
VoD/HDTV
Services
Acq’d WaveSmith
June 2003
Voice/video/
DSL Services
DN™ 7
MPLS/ATM/FR
Services
IP
Services
CoreStream™
Storage
Services
ONLINE™ Metro
CoreDirector™
Ethernet
Services
Private Line
Services
MetroDirector
K2™
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ONLINE Edge
Disciplined Acquisition Strategy WaveSmith
Acquisition/Partner candidates should:
– Be disruptive to existing network economics

– Fit with CIENA’s network vision

– Have adjacency (via customer or

technology)
– Deliver good margin profile

– Have channel fit or provide new channel

– Have visible path to #3+ market share in

growth market
MultiService Switching
Revenue per $ of CapEx
150%
increase
Traditional
DN
Applications:
DSL Aggregation, VoD, ATM,
Frame Relay
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Capturing Services Revenue
Core Network
Access Network
Metro Network
VoD/HDTV
Services
Voice/video/
DSL Services
DN™ 7
MPLS/ATM/FR
Services
Acq’d Akara
Aug 2003
CoreStream™
CN™ 2000
IP
Services
Storage
Services
ONLINE™ Metro
CoreDirector™
Ethernet
Services
Private Line
Services
MetroDirector
K2™
14
ONLINE Edge
Disciplined Acquisition Strategy - Akara
Acquisition/Partner candidates should:
– Be disruptive to existing network economics

– Fit with CIENA’s network vision

– Have adjacency (via customer or

technology)
– Deliver good margin profile

– Have channel fit or provide new channel

– Have visible path to #3+ market share in

growth market
SONET/SDH Storage
Revenue per $ of CapEx
230%
increase
Traditional
CN 2000
Applications
Storage extension, Access WDM,
Low-Cost Ethernet Transport
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Capturing Services Revenue
Core Network
Access Network
Metro Network
VoD/HDTV
Services
Laurel
Partnership
Sept 2003
Internet Photonics
Catena
DN™ 7
Voice/video/
DSL Services
MPLS/ATM/FR
Services
CoreStream™
CN™ 2000
ST™ (Laurel)
Storage
Services
ONLINE™ Metro
CoreDirector™
PacketWave™ (Luminous)
MetroDirector
K2™
Luminous
Partnership
Sept 2003
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IP
Services
Ethernet
Services
Private Line
Services
ONLINE Edge
Background
•
Acquisition closed May 3, 2004.
•
75.9 million shares of CIENA Common Stock issued.
•
Majority of shares not subject to lock-up.
•
A leading innovator in the broadband access market
•
Customers
•
–
Three RBOCs (including Bell South)
–
Major IOCs
–
CLECs
Products
–
CNX-5
–
CN1000
–
CN1000FX
Yankee Group: Overall broadband equipment
revenues in the access area will present a
market opportunity in excess of $7.5 billion
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Background
•
Acquisition closed May 3, 2004.
•
24.1 million shares of CIENA Common Stock issued.
•
No lock-up.
•
A leading supplier of carrier-grade optical Ethernet transport
and switching solutions
•
Customers
•
–
Six of the top ten U.S. cable operators (including Cablevision,
Cox, Adelphia)
–
Carriers such as TDS Metrocom deploying Ethernet private-line
services
Products
–
LightStack MXA
–
LightStack MX
–
LightStack GSLAM
–
LightHandler
Infonetics Research: Worldwide Ethernet services
market will grow from approximately $2.9 billion in
2003 to $7.5 billion by 2007.
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CIENA’s Transformation: Beyond the
Product Portfolio
• Shifting investment to access/service delivery from core
– Goal of reducing ongoing opex (exclusive of Catena/IPI) by
10% to 20% in FY ’04
– Announced facilities consolidation and associated headcount
reduction affecting 425 employees (~25% of CIENA’s workforce
prior to Catena/IPI) on April 20, 2004
– 2002-2003 investments will enable us to maintain core leadership
• Manufacturing nearly 100% outsourced
– Currently working to consolidate contract manufacturers
• Services business restructured to profitability
• Sales force revamped to include skills/experience required
for broader portfolio
• 30+ channel partners developed to target enterprise
opportunities/new geographies
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Transforming CIENA to Encompass
Broadband Service Delivery
From (2003)
To Include (2005)
Value Proposition
CAPEX/OPEX Savings
Service Revenues
Technologies
Core Optical
Broadband Edge & Access
Competencies
High Quality/Low Volumes
Direct Sales Only
Low Cost/High Volumes
Channels/Enterprise Pull
FY ’01
FY ’02
FY ’03
FY ’04
$1.6 billion
$361 million
$283 million
(stated goal
prior to Catena & IPI)
Core Networking
Service/Tech Support
Metro Networking
Solutions & Software
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Data Networking/
Service Delivery
T.B.D.
Thank You!