Transcript CIENA Corporate Template

Merrill Lynch
Global Communications Conference
CIENA: Beyond Optical
Gary Smith
CEO & President
March 17, 2004
Disclosure Documents
INVESTORS ARE URGED TO READ THE PROXY STATEMENT-PROSPECTUS
RELATING TO THE PROPOSED CIENA/CATENA NETWORKS, INC. TRANSACTION AND
THE INFORMATION STATEMENT-PROSPECTUS RELATING TO THE PROPOSED
CIENA/INTERNET PHOTONICS, INC. TRANSACTION THAT CIENA EXPECTS TO FILE
WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. THE
PROXY STATEMENT-PROSPECTUS AND THE INFORMATION STATEMENT
PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC BY CIENA MAY BE
OBTAINED, WHEN THEY BECOME AVAILABLE, FOR FREE AT THE SEC’S WEB SITE,
WWW.SEC.GOV. THE PROXY STATEMENT-PROSPECTUS, THE INFORMATION
STATEMENT-PROSPECTUS AND THESE OTHER DOCUMENTS MAY ALSO BE
OBTAINED FOR FREE FROM CIENA, OR WITH RESPECT TO THE TRANSACTION THAT
INVOLVES IT, FROM EITHER CATENA NETWORKS OR INTERNET PHOTONICS.
REQUESTS TO CIENA MAY BE DIRECTED TO CIENA, 1201 WINTERSON RD.,
LINTHICUM, MD, 21090-2205, ATTENTION: INVESTOR RELATIONS. REQUESTS TO
CATENA MAY BE DIRECTED TO: CATENA NETWORKS, INC., 307 LEGGET DRIVE,
KANATA, ON, K2K 3C8, ATTENTION: KEVIN FORBES, VP OF FINANCE. REQUESTS TO
INTERNET PHOTONICS MAY BE DIRECTED TO: INTERNET PHOTONICS, INC., 1030
BROAD STREET, SHREWSBURY, NJ 07702, ATTENTION: STEVE WASZAK, CHIEF
FINANCIAL OFFICER.
CIENA, its directors, executive officers and certain other members of management and
employees may be soliciting proxies from Catena stockholders. Catena Networks, Inc., its
directors, executive officers and certain other members of management and employees may
be soliciting proxies from Catena stockholders.
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Forward-Looking Statements
This presentation includes certain “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The forward-looking
statements in this broadcast include statements about future financial
and operating results, expected revenue growth, the expected state of
the telecom industry and the proposed CIENA/Catena Networks, Inc.
and CIENA/Internet Photonics, Inc. transactions. 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.
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Agenda
• Where we were
• What changed?
• CIENA: Beyond optical
• CIENA’s Transformation: Beyond the product
portfolio
4
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
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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
What Changed?
Relative cost
of capital
equipment
$650 / Mbps
Service
Distribution
Network
$18 / Mbps
Atlanta
CO
Long-Haul
Network
$650 / Mbps
Baltimore
Service
Distribution
Network
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.
•
Large enterprises taking on increased network responsibility.
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The Optical Market
2000 = $27.0B
2001 = $20.6B
2002 = $9.4B
2003 = $6.8B*
2004 = $6.8B**
2005 = $6.8B**
30000
$ Million
25000
20000
15000
10000
5000
0
2000
2001
2002
2003
* Plus or minus $500M.
**Plus or minus $700M.
The total optical networking market consists of optical switches, core/metro/access DWDM, ADMs,
DCSs, and next-generation metro switches. Sources: Based on industry analyst & CIENA estimates.
CIENA Proprietary and Confidential
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2004
2005
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
ATM/FR/MPLS
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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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
ATM/FR/MPLS
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
ATM/FR/MPLS
Services
Acq’d Akara
Aug 2003
CoreStream™
CN™ 2000
IP
Services
Storage
Services
ONLINE™ Metro
CoreDirector™
Ethernet
Services
Private Line
Services
MetroDirector
K2™
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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
ATM/FR/MPLS
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
•
A leading innovator in the broadband access market
•
Founded: December 1998
•
Offices in Kanata, ON and RTP, NC
•
~250 employees
•
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
•
A leading supplier of carrier-grade optical Ethernet transport
and switching solutions
•
Founded: 2000
•
Offices in Shrewsbury, NJ and Marlborough, MA
•
~110 employees
•
Customers
•
–
Six of the top ten U.S. cable operators (including Cablevision,
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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Transaction Highlights
•
77.5 million shares of CIENA common
stock
•
Value: approximately $486.7 million
•
Catena shareholder approval req’d
•
24.4 million shares of CIENA
common stock
•
Value: approximately $150 million
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•
Both subject to customary
clearances
•
Anticipated closing: by the
end of CIENA’s fiscal Q3
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
– 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!