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•	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 any of our large customers, a significant reduction in their spending, or a material change in their networking or procurement strategies;

•	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 and 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 erosion 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 security 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 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 grow our software business and address networking strategies, including software-defined networking and network function virtualization;

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•	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;

•	future legislation or executive action in the U.S. relating to tax policy or trade regulation;

•	the write-down of significant assets including 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.

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•

Cloud-Based Services. Enterprises and consumers continue to replace locally-housed computing by adopting a broad array of innovative cloud-based models – including Platform as a Service (PaaS), Software as a Service (SaaS) and Infrastructure as a Service (IaaS) – and an expanding range of cloud-based services that host key applications, store data, enable the viewing and downloading of content, and utilize on-demand computing resources.

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Over-the-Top (OTT) Services and Video Streaming. OTT content refers to video, multimedia and other applications provided directly from the content source to the viewer or end user across a third-party network. Traffic from streaming and OTT services, including high definition and ultra-high definition video, has expanded with the increased availability of, and end-user demand for, video content accessible through a variety of devices and media.

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On-Demand Services. Users of communications services are requiring an on-demand service level that allows them to be connected wherever and whenever they desire. Businesses rely upon enterprise services and data center connectivity that facilitate global operations, employee mobility and access to critical business applications and data. Consumers expect broadband services, including peer-to-peer internet applications, augmented reality applications and multimedia streaming and downloads, to be available on-demand.

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Mobile Devices and Applications. Traffic from mobile applications, including video, internet and data services, has expanded with the proliferation of smartphones, tablets and other wireless devices. Because much of the wireless traffic ultimately travels across a wireline network to reach its destination, growth in mobile communications continues to place demands upon wireline networks, including backhaul and fronthaul networks emanating from cell sites.

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Network Densification. Network operators will be required to adopt next-generation network standards in order to cost-effectively accommodate increased bandwidth and service demands from emerging wireless and cable initiatives and to deliver greater capacity closer to the end users. Fifth-Generation wireless broadband technology (5G) is expected to enable significant increases in data consumption by a growing number of users and devices, thereby better supporting what some refer to as the “Internet of Things” and other emerging applications. “Fiber deep” initiatives by cable and multiservice operators are designed to push fiber closer to the end-user, increasing potential bandwidth to homes and enterprises while addressing power, space and maintenance costs. Implementation of these initiatives is expected to affect wireline networks significantly, particularly in access networks and mobile backhaul applications.

•	Internet of Things. As the number of networked connections between devices and servers grows, machine-to-machine-related traffic (M2M) is expected to represent an increasing portion of traffic as the Internet of Things evolves. These connections can provide value-added services and allow sharing of data that can be monitored and analyzed. We

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Ultra-High Definition TV and Virtual and Augmented Reality. Ultra-high definition TV and the advent of immersive technologies like 360° video, virtual reality, and augmented reality are likely to place meaningful capacity and capability demands on networks as adoption of these technologies grows. The television, internet and consumer electronics industries are rapidly advancing these technologies and making them more widely available and affordable to consumers.

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Orchestration and Automation. Software-based orchestration simplifies the end-to-end creation, automation and deployment of services across multiple physical and virtual network domains. We believe software-based orchestration presents an opportunity to reduce network complexity and offers an alternative to certain elements of traditional operations support and business support systems, which network operators have historically relied upon to support network management functions such as inventory, service provisioning, network configuration and fault management.

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Network Function Virtualization (NFV). Through NFV, network operators can decouple physical network assets from the services or capabilities they provide. We believe that NFV can decrease power and space requirements, reduce cost, and improve network flexibility and agility by eliminating costly, single-function network appliances and enabling these functions via software and general computing hardware and servers.

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Software-Defined Networking (SDN). SDN seeks to simplify networks to create more open environments that ease management, support automation, and quickly deliver customized services to end users, by enabling individual network elements to be directly programmable by standards-based software control. This results in end-to-end visibility of network flows, enabling the ability to optimize traffic paths and control data flows through a network.

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•	Communications Service Providers. Our communications service provider customers, including regional, national and international wireline and wireless carriers, form our historical customer base and represent a majority of our revenue.

•	Web-scale Providers. Our “Web-scale” or “Web 2.0” customers include a diverse range of internet content providers and data center operators, focused on applications such as search, social media, video, real-time communications and cloud-based service offerings, data center operators and other emerging network operators.

•	Cable & Multiservice Operators (MSO). Our customers include regional, national and international cable and multiservice operators.

•	Submarine Network Operators. Our customers include service providers, Web-scale providers, and consortia operators of submarine communications networks across the globe.

•	Enterprises. Our enterprise customers include large, multi-site commercial organizations, including participants in the financial, health care, transportation, utilities, energy and retail industries.

•	Government, Research and Education (R&E). Our government customers include federal and state agencies in the United States as well as international government entities. Our R&E customers include research and education institutions around the world, as well as communities or consortia including leaders in research, academia, industry and government.

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Manage, Control and Plan (MCP). Blue Planet MCP software provides SDN-based domain control of Ciena's next-generation packet and optical networks, including equipment commissioning, service provisioning, assurance and performance monitoring. Operations are greatly automated and simplified through MCP’s open programmatic APIs and its intuitive GUI. This enables granular resource management and control, and the ability to plan networks efficiently and effectively to meet customer service needs. Built on Blue Planet's open, extensible microservices-based architecture, MCP marks a strategic shift from legacy, fragmented network management software, leading the transformation to programmable cloud-native operations that easily integrate into operators’ business processes.

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Multi-Domain Service Orchestration (MDSO). Network infrastructures are comprised of multiple technology layers and domains — such as the data center, cloud, metro, access and core networks — and it is often complex for network operators to offer services end-to-end in this environment. Blue Planet enables service orchestration across multiple network (physical and virtual) domains and multiple hardware and software vendors. By using open APIs and intent-based, model-driven templates, Blue Planet simplifies end-to-end services lifecycle management and increases service velocity by abstracting the complexity of underlying domains. We believe our MDSO solution can enable network operators to minimize vendor-specific management silos, reduce network complexity and improve end-to-end service visibility and control.

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NFV Orchestration (NFVO). To reduce their dependence upon single-purpose hardware platforms and accelerate the time to market for new revenue-generating services, network operators are increasingly looking for solutions that enable network functions through software that runs on industry-standard servers, network and storage platforms. Blue Planet provides network operators with carrier-grade, NFV management and orchestration capabilities for instantiating and managing virtualized network functions and data center resources. Blue Planet uses an open, vendor-agnostic approach that allows network operators to select and scale those virtual network functions (VNFs) they wish to offer to their end customers. We believe that our NFVO solution can enable network operators to increase network programmability, reduce complexity and cost, and reduce time-to-market with new, revenue-generating services.

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Analytics. Blue Planet Analytics incorporates big data analytics and machine-learning innovations for generating deep insights into the network, thereby helping operators make smarter, data-driven business decisions. Analytics consists of two components: a robust and flexible framework for collecting, processing, and storing data from multiple sources across the network; and upper-layer analytics applications that leverage machine learning innovations. This design approach gives operators the ability to visualize and identify trends to create more profitable services, better predict

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•	Network planning and design services, including:

•	network analytics;

•	reconfiguration and migration services;

•	Deployment services, including turn-key installation and turn-up and test services;

•	Network maintenance and support services, including:

•	helpdesk and technical support assistance;

•	spares and logistics management;

•	engineering dispatch, preventive maintenance, and on-site professional services; and

•	equipment repair and replacement;

•	Network management and monitoring through network operations center (NOC) services; and

•	Project management services, including staging, site preparation and installation support activities.

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•	Enhancing and extending our Packet-Optical and Packet Networking solutions, including:

•	Coherent modem leadership and continued development of our WaveLogic optical processor to advance transmission speed, spectral efficiency, power usage and reach;

•	Legacy service migration to next-generation packet infrastructures; and

•	Support of fiber densification initiatives, such as 5G and fiber deep.

•	Developing products that enhance software-based network management, automation and control, service orchestration and network function virtualization, and analytics capabilities.

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•	product functionality, speed, capacity, scalability and performance;

•	price, cost per bit and total cost of ownership of our solutions;

•	incumbency and strength of existing business relationships;

•	ability to offer comprehensive networking solutions, consisting of hardware, software and services;

•	product development that satisfies customers’ immediate and future network requirements;

•	flexibility and openness of platforms, including ease of integration, interoperability and integrated management;

•	ability to offer solutions that accommodate a range of different consumption models;

•	space and power considerations;

•	manufacturing and lead-time capability; and

•	services and support capabilities.

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(1)	Member of the Compensation Committee

(2)	Member of the Audit Committee

(3)	Member of the Governance and Nominations Committee

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•	broader macroeconomic conditions, including weakness and volatility in global markets, that affect our customers;

•	changes in capital spending by customers, in particular our large communications service provider customers;

•	changes in networking strategies;

•	order timing, volume and cancellations;

•	backlog levels;

•	the level of competition and pricing pressure in our industry;

•	the impact of commercial concessions or unfavorable commercial terms required to maintain incumbency or secure new opportunities with key customers;

•	our level of success in achieving cost reductions and improved efficiencies in our supply chain;

•	the pace and impact of price erosion that we regularly encounter in our markets;

•	our incurrence of start-up costs, including lower margin phases of projects required to support initial deployments, gain new customers or enter new markets;

•	the impact of technology-based price compression and the introduction or substitution of new platforms for existing solutions;

•	the timing of revenue recognition on sales, particularly relating to large orders;

•	the mix of revenue by product segment, geography and customer in any particular quarter;

•	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.

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•	product functionality, speed, capacity, scalability and performance;

•	price, cost per bit and total cost of ownership of our solutions;

•	incumbency and strength of existing business relationships;

•	ability to offer comprehensive networking solutions, consisting of hardware, software and services;

•	product development that satisfies customers’ immediate and future network requirements;

•	flexibility and openness of platforms, including ease of integration, interoperability and integrated management;

•	ability to offer solutions that accommodate a range of different consumption models;

•	space and power considerations;

•	manufacturing and lead-time capability; and

•	services and support capabilities.

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•	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;

•	difficulty forecasting operating results and making 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.

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•	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 or environmental factors;

•	changes in U.S. law or policy governing foreign 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;

•	limited warranties provided to us; and

•	potential misappropriation of our intellectual property.

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•	damage to our reputation, declining sales and order cancellations;

•	increased costs to remediate defects or replace products;

•	payment of liquidated damages, contractual or similar penalties, or other claims for performance failures or delays;

•	increased warranty expense or estimates resulting from higher failure rates, additional field service obligations or other rework costs related to defects;

•	increased inventory obsolescence;

•	costs and claims that may not be covered by liability insurance coverage or recoverable from third parties; and

•	delays in recognizing revenue or collecting accounts receivable.

•	the impact of economic conditions in countries outside the United States;

•	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;

•	social, political and economic instability;

•	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, epidemics and acts of war or terrorism.

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•	pay substantial damages or royalties;

•	comply with an injunction or other court order that could prevent us from offering certain of our products;

•	seek a license for the use of certain intellectual property, which may not be available on commercially reasonable terms or at all;

•	develop non-infringing technology, which could require significant effort and expense and ultimately may not be successful; and

•	indemnify our customers or other third parties pursuant to contractual obligations to hold them harmless or pay expenses or damages on their behalf.

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•	delays in recognizing revenue;

•	liability for injuries to persons, damage to property or other claims relating to the actions or omissions of our service partners;

•	our services revenue and gross margin may be adversely affected; and

•	our relationships with customers could suffer.

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•	increasing our vulnerability to adverse economic and industry conditions;

•	limiting our ability to obtain additional financing, particularly in unfavorable capital and credit market conditions;

•	debt service and repayment obligations that may adversely impact our results of operations and reduce the availability of cash resources for other business purposes;

•	limiting our flexibility in planning for, or reacting to, changes in our business and the markets; and

•	placing us at a possible competitive disadvantage to competitors that have better access to capital resources.

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•	failure to achieve the anticipated transaction benefits or the projected financial results and operational synergies;

•	greater than expected acquisition and integration costs;

•	disruption due to the integration and rationalization of operations, products, technologies and personnel;

•	diversion of management attention;

•	difficulty completing projects of the acquired company and costs related to in-process projects;

•	difficulty managing customer transitions or entering into new markets;

•	the loss of key employees;

•	disruption or termination of business relationships with customers, suppliers, vendors, landlords, licensors and other business partners;

•	ineffective internal controls over financial reporting;

•	dependence on unfamiliar suppliers or manufacturers;

•	assumption of or exposure to unanticipated liabilities, including intellectual property infringement or other legal claims; and

•	adverse tax or accounting impact.

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(3)	See Note 2 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for additional information regarding the acquisition of Cyan Inc. (“Cyan”) on August 3, 2015.

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•	Product revenue for the fourth quarter of fiscal 2017 increased by $5.5 million, primarily reflecting an increase of $6.6 million in Networking Platforms partially offset by a decrease of $1.1 million in software platforms within our Software-Related Services segment.

•	Services revenue for the fourth quarter of fiscal 2017 increased by $10.2 million.

•	North America revenue for the fourth quarter of fiscal 2017 was $440.5 million, a decrease from $465.2 million in the third quarter of fiscal 2017. This primarily reflects decreases of $27.4 million in Networking Platforms and $1.0 million in Software and Software-Related Services. These decreases were partially offset by an increase of $3.7 million in Global Services.

•	Europe, Middle East and Africa ("EMEA") revenue for the fourth quarter of fiscal 2017 was $110.7 million, an increase from $96.1 million in the third quarter of fiscal 2017. This primarily reflects increases of $8.5 million in Networking Platforms and $6.5 million in Global Services.

•	Caribbean and Latin America (“CALA”) revenue for the fourth quarter of fiscal 2017 was $43.5 million, a decrease from $51.7 million in the third quarter of fiscal 2017, primarily reflecting a decrease of $9.0 million in Networking Platforms.

•	Asia Pacific (“APAC”) revenue for the fourth quarter of fiscal 2017 was $149.7 million, an increase from $115.7 million in the third quarter of fiscal 2017. This reflects an increase of $34.5 million in Networking Platforms partially offset by a decrease of $1.2 million in Global Services.

•	For the fourth quarter fiscal 2017, AT&T accounted for 16.7% and Verizon accounted for 11.0% of total revenue. AT&T accounted for 16.6% and Verizon accounted for 11.4% of total revenue for the third quarter of fiscal 2017.

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•	Networking Platforms revenue increased, primarily reflecting product line sales increases of $146.2 million of our Converged Packet Optical products and $60.2 million of our Packet Networking products, partially offset by a product line sales decrease of $22.5 million in our Optical Transport products.

◦	Converged Packet Optical sales primarily reflect increases of $100.8 million of our Waveserver stackable interconnect system, $61.5 million of our 6500 Packet-Optical Platform, $34.2 million of our 5430 Reconfigurable Switching System and $6.8 million of our OTN configuration for the 5410 Reconfigurable

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◦	Packet Networking sales primarily reflect increases of $38.7 million of our 3000 and 5000 families of service delivery and aggregation switches, $11.9 million in initial sales of packet networking platform independent software and $10.2 million of our 8700 Packetwave Platform.

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Optical Transport sales have continued to experience significant declines, as expected. Our Optical Transport products have either been previously discontinued, or are expected to be discontinued, reflecting network operators’ transition toward next-generation converged network architectures addressed by solutions within our Converged Packet Optical product line. Accordingly, commencing in fiscal 2018, sales of Optical Transport will be reflected within the Converged Packet Optical product line of our Networking Platforms segment.

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Software and Software-Related Services revenue increased, primarily reflecting sales increases of $19.0 million in software-related services and $17.2 million of our software platforms. The increase in software-related services is primarily due to sales increases of $12.5 million of software subscription services, $4.2 million of services supporting our Blue Planet software platform and advance software applications and $1.5 million of software-enabled services. The increase in software platform sales primarily reflects increases of $9.0 million in sales of our Blue Planet software platform and advanced software applications and $6.5 million in sales of our OneControl Unified Management System.

•	Global Services revenue decreased, primarily reflecting sales decreases of $13.4 million of our installation and deployment services, $3.9 million of our consulting and network design services and $1.6 million of our maintenance support and training services. These sales decreases were primarily due to reduced activity in the North America and CALA regions as described below.

•	North America revenue primarily reflects increases of $34.7 million within our Networking Platforms segment and $25.7 million within our Software and Software-Related Services segment, partially offset by a revenue decrease of $13.6 million within our Global Services segment.

◦	Networking Platforms revenue primarily reflects product line increases of $29.0 million of Packet Networking sales and $11.5 million of Converged Packet Optical sales, partially offset by a product line decrease of $5.7 million in Optical Transport sales.

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The revenue increase within Converged Packet Optical sales primarily reflects increases of $85.7 million in sales of our Waveserver stackable interconnect system, partially offset by decreases in sales of $48.2 million of our Z-Series Packet-Optical Platform, $14.8 million of our 6500 Packet-Optical Platform and $13.3 million of our 5430 Reconfigurable Switching System. The revenue increase for our Waveserver stackable interconnect system primarily reflects increased sales to Web-scale providers.

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The revenue increase within Packet Networking primarily reflects increases of $15.5 million in sales of our 3000 and 5000 families of service delivery and aggregation switches and $11.9 million of packet networking platform independent software. Packet Networking sales have traditionally been concentrated, with significant sales to AT&T. However, during fiscal 2017, a significant portion of the growth benefited from sales to other network operators.

◦	Software and Software-Related Services revenue primarily reflects sales increases of $10.7 million of our software subscription services, $5.3 million of our OneControl Unified Management System, $5.2 million of our Blue Planet software platform and $2.8 million of services supporting our Blue Planet software platform and advance software applications.

◦	Global Services revenue primarily reflects decreases of $9.0 million for installation and deployment activities and $5.0 million in maintenance support and training. Installation and deployment activities were impacted by the contribution of sales of our Waveserver stackable interconnect system, which does not typically include installation services.

•	EMEA revenue primarily reflects increases of $5.4 million within our Networking Platforms segment and $5.4 million within our Software and Software-Related Services segment.

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Networking Platforms segment revenue primarily reflects product line increases of $9.7 million in Converged Packet Optical sales and $3.7 million in Packet Networking sales. These increases were partially offset by a decrease of $8.0 million in Optical Transport sales. The increase in Converged Packet Optical sales primarily reflects an increase of $10.8 million in sales from our Waveserver stackable interconnect system.

•	CALA revenue primarily reflects decreases of $22.1 million within our Networking Platforms segment and $8.9 million within our Global Services segment. The decrease in CALA revenue primarily relates to decreased sales to certain communications service providers in Brazil and to AT&T in Mexico.

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Networking Platforms segment revenue primarily reflects product line decreases of $20.4 million of Converged Packet Optical sales and $5.4 million in Optical Transport sales partially offset by a product line increase of $3.7 million of Packet Networking sales. The decrease in Converged Packet Optical sales primarily reflects $15.8 million in sales of our 5430 Reconfigurable Switching System and $3.4 million in sales of our 6500 Packet-Optical Platform.

◦	Global Services segment revenue primarily reflects reduced installation and deployment activities which reflect the decrease in sales of our Networking Platforms products as described above.

•	APAC revenue primarily reflects increases of $165.9 million within our Networking Platforms segment, $4.9 million within our Software and Software-Related Services segment and $3.9 million within our Global Services segment. Revenue contribution from India, which increased by $115.5 million in fiscal 2017, was a significant driver of our annual revenue growth.

◦	Networking Platforms segment revenue primarily reflects product line increases of $145.4 million of Converged Packet Optical sales and $23.9 million of Packet Networking sales, partially offset by a product line decrease of $3.4 million in Optical Transport sales.

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Converged Packet Optical revenue primarily reflects an increase of $79.5 million in sales of our 6500 Packet-Optical Platform primarily due to increases in sales through our strategic relationship with Ericsson in Australia, sales to Reliance Jio Infocomm in India and sales to service providers in Japan. The revenue increase within Converged Packet Optical also reflects an increase of $64.3 million of our 5430 Reconfigurable Switching System sales primarily due to increased sales to Reliance Jio Infocomm in India.

▪	Packet Networking revenue primarily reflects increases of $15.9 million in sales of our 3000 and 5000 families of service delivery and aggregation switches and $8.0 million in sales of our 8700 Packetwave Platform primarily to certain communication service providers in India.

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•	Gross profit as a percentage of revenue, or gross margin reflects improved services gross profit partially offset by reduced product gross profit.

•	Gross profit on products as a percentage of product revenue, or product gross margin, decreased primarily as a result of market-based price erosion partially offset by product cost reductions and increased software platform sales.

•	Gross profit on services as a percentage of services revenue, or services gross margin, increased, primarily due to increased sales of higher margin software subscription services and decreased sales of lower margin installation and deployment services.

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Research and development expense was adversely affected by $2.0 million as a result of foreign exchange rates, net of hedging, primarily due to a weaker U.S. Dollar in relation to the Canadian Dollar. Including the effect of foreign exchange rates, research and development expenses increased by $23.5 million. This increase primarily reflects increases of $17.6 million in employee and compensation costs and $9.5 million in facilities and information technology costs largely due to the facilities transitions described above. These increases were partially offset by decreases of $2.9 million in professional services and $1.1 million in prototype expense.

•	Selling and marketing expense increased by $6.4 million, primarily reflecting increases of $1.5 million in facilities and information technology costs, $1.5 million in technology and related costs, $1.4 million in employee and compensation costs and $1.1 million in travel and related costs.

•	General and administrative expense increased by $9.8 million, primarily reflecting increases of $4.5 million for employee and compensation costs, $2.9 million for professional services and legal fees and $1.2 million for facilities and information technology costs.

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•	Amortization of intangible assets decreased due to certain intangible assets having reached the end of their economic lives.

•	Acquisition and integration costs incurred during fiscal 2016 reflects expense for financial, legal and accounting advisors and severance and other employee compensation costs, related to our acquisition of Cyan on August 3, 2015 and our acquisition of certain high-speed photonics components (“HSPC”) assets of TeraXion, Inc. (“Teraxion”) and its wholly-owned subsidiary on February 1, 2016.

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Significant asset impairments and restructuring costs during fiscal 2017 primarily reflects a $13.7 million asset impairment related to a trade receivable for a single customer in the APAC region, $5.9 million for workforce reductions and $4.4 million for unfavorable lease commitments and relocation costs incurred in connection with our research and development center facility transitions in Ottawa, Canada. For more information about the significant asset impairment related to a trade receivable, see “Overview” above. For more information on our workforce reductions, see Note 3 to our Consolidated Financial Statements included in in Item 8 of Part II of this annual report for more information. For more information on our research and development facility transition, see Item 2 of Part I and Note 3 to our Consolidated Financial Statements included in in Item 8 of Part II of this annual report.

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Interest and other income (loss), net primarily reflects $11.9 million of improved impact of foreign exchange rates on assets and liabilities denominated in a currency other than the relevant functional currency, net of hedging activity, partially offset by $3.6 million in debt modification expenses related to the 2022 Term Loan that was entered into in the second quarter of fiscal 2017 and the exchange offer of our New Notes in the fourth quarter of fiscal 2017. For additional information about our term loans and convertible senior notes, see Note 16 to our Consolidated Financial Statements included in Item 8 of Part II of this report.

•

Interest expense decreased slightly, primarily due to a reduction in our aggregate outstanding debt due to the refinancing of our term loans during the second quarter of fiscal 2017 and the maturity of the 2017 Notes on June 15, 2017. This decrease was offset by higher interest expense related to our new facilities in Ottawa, Canada which are subject to capital lease accounting treatment. See Note 16 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information on our debt and see Note 10 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information regarding our buildings subject to capital leases.

•	Provision (benefit) for income taxes decreased primarily due to a reversal of a deferred tax asset valuation allowance. See Note 20 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information.

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•	Networking Platforms revenue increased, primarily reflecting product line sales increases of $118.2 million of our Converged Packet Optical products and $23.6 million of our Packet Networking products, partially offset by a decrease of $37.0 million in sales of our Optical Transport products.

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Converged Packet Optical sales primarily reflect increases of $107.7 million of our 6500 Packet-Optical Platform, $33.7 million in sales relating to the Z-Series Packet-Optical Platform, acquired from Cyan in the fourth quarter of fiscal 2015, and $8.2 million in sales of our Waveserver stackable data center interconnect system. Increased 6500 Packet-Optical Platform revenue reflects increased sales to a diverse set of customers including communications service providers, Web-scale providers and enterprise customers, partially offset by a decrease in sales to AT&T. These increases were also partially offset by decreases of $23.7 million in sales of our OTN configuration for the 5410 Reconfigurable Switching System and $7.9 million in sales of our CoreDirector® Multiservice Optical Switches.

◦	Packet Networking sales reflect increases of $16.2 million in sales of our 3000 and 5000 family of service delivery and aggregation switches and $9.3 million in sales of our 8700 Packetwave Platform, partially offset by a decrease of $1.4 million in sales of Ethernet packet configuration for our 5410 Service Aggregation Switch.

◦	Optical Transport sales have continued to experience significant declines, as expected. Our Optical Transport products have either been previously discontinued, or are expected to be discontinued, reflecting network operators’ transition toward next-generation converged network architectures addressed by solutions within our Converged Packet Optical product line.

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Software and Software-Related Services revenue increased, primarily reflecting increases of $14.6 million in software-related services sales and $10.2 million in sales of our software platforms. The increase in software-related services revenue primarily reflects increased sales of software subscription services. The increase in software platform revenue reflects $6.7 million in initial sales of our Blue Planet software platform and advanced software applications and a $1.4 million increase in sales of our OneControl Unified Management System. Segment revenue also includes $2.1 million in sales of Planet Operate software acquired from Cyan.

•

Global Services revenue increased, primarily reflecting increases of $15.4 million in sales of our installation and deployment services, $5.0 million in sales of our consulting and network design services and $4.9 million in sales of our maintenance and support services. Global Services segment revenue includes $16.1 million and $3.4 million of services revenue acquired from Cyan for fiscal 2016 and fiscal 2015, respectively.

•

North America revenue primarily reflects increases of $54.8 million within our Networking Platforms segment, $22.8 million within our Software and Software-Related Services segment and $13.3 million within our Global Services segment. Increased Networking Platforms segment revenue primarily reflects product line increases of $63.1 million of Converged Packet Optical sales and $11.0 million of Packet Networking sales, partially offset by a decrease of $19.3 million in Optical Transport sales. Converged Packet Optical sales reflect a $42.3 million increase in sales of our 6500 Packet-Optical Platform, reflecting increased sales to a diverse set of customers including communications service providers, Web-scale providers and enterprise customers, partially offset by a decrease in sales to AT&T and cable and multiservice operators. Converged Packet Optical sales also reflect an increase of $24.6 million of sales for our Z-Series Packet-Optical Platform acquired from Cyan.

•

EMEA revenue primarily reflects a decrease of $9.6 million within our Networking Platforms segment, partially offset by an increase of $3.8 million within our Global Services segment. Networking Platforms segment revenue reflects product line decreases of $10.8 million in Optical Transport sales and $1.6 million in Converged Packet Optical sales, partially offset by a product line increase of $2.8 million in Packet Networking sales. In recent periods, we have seen certain of our large service provider customers in EMEA take steps to constrain their capital expenditure budgets.

•	CALA revenue primarily reflects a decrease of $11.1 million within our Networking Platforms segment, partially offset by an increase of $4.5 million within our Global Services segment. CALA revenue reflects decreased sales to certain communication service providers, primarily in Brazil, partially offset by increased sales to AT&T in Mexico.

•

APAC revenue reflects increases of $70.8 million within our Networking Platforms segment, $3.6 million within our Global Services segment and $2.5 million within our Software and Software-Related Services segment. The revenue increase within our Networking Platforms segment primarily reflects an increase of our 6500 Packet-Optical Platform sales to certain communications service providers, particularly in India, enterprise customers, submarine network operators and sales through our strategic partnership with Ericsson.

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•	Gross profit as a percentage of revenue, or gross margin, increased as a result of the factors described below.

•	Gross profit on products as a percentage of product revenue, or product gross margin, increased as a result of our success in driving product cost reductions as compared to the market-based price erosion we encountered during the period, and increased software revenue.

•	Gross profit on services as a percentage of services revenue, or services gross margin, increased, primarily due to increased sales of higher margin software subscription services, reduced repair costs to support maintenance service contracts and increased sales and improved margins on consulting services.

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Research and development expense benefited by $16.4 million as a result of foreign exchange rates, net of hedging, primarily due to a stronger U.S. Dollar in relation to the Canadian Dollar. Including the effect of foreign exchange rates, research and development expenses increased by $37.6 million, primarily reflecting increases of $16.7 million in employee compensation and related costs, $11.0 million in facilities and information systems expense, $7.4 million in professional services and $4.0 million in depreciation expense. These increases were partially offset by a decrease of $4.8 million in prototype expense.

•

Selling and marketing expense benefited by $4.9 million as a result of foreign exchange rates, primarily due to a stronger U.S. Dollar in relation to the Euro and the Canadian Dollar. Including the effect of foreign exchange rates, selling and marketing expenses increased by $15.9 million, primarily reflecting increases of $7.2 million in employee compensation and related costs, $3.6 million in facilities and information systems expense, $3.5 million in professional services and $1.5 million in travel and related costs. These increases were partially offset by a decrease of $1.8 million in trade show and related costs.

•

General and administrative expense benefited by $1.7 million as a result of foreign exchange rates, primarily due to a stronger U.S. Dollar in relation to the Canadian Dollar and Brazilian Real. Including the effect of foreign exchange rates, general and administrative expense increased by $9.4 million, primarily reflecting increases of $5.0 million in employee compensation and related costs, $2.3 million in facilities and information systems expense and $1.6 million in professional services.

•	Amortization of intangible assets decreased due to certain intangible assets having reached the end of their economic lives.

•	Acquisition and integration costs reflect expense for financial, legal and accounting advisors and severance and other employee compensation costs, related to our acquisition of Cyan on August 3, 2015 and our acquisition of certain HSPC assets of TeraXion and its wholly-owned subsidiary on February 1, 2016.

•

Significant asset impairments and restructuring costs primarily reflect certain severance and related expense associated with headcount reductions and initiatives to improve efficiency. As we look to manage operating expense and drive further efficiency and leverage from our operations, we will continue to assess allocation of headcount, facilities and other resources to ensure that they are optimized toward key growth opportunities. See Note 3 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information.

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•	Interest and other income (loss), net reflects a beneficial impact, as compared to the prior period, 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 also reflects an increase in investment interest income.

•	Interest expense increased, primarily due to additional outstanding indebtedness, including our $250 million 2021 Term Loan that was entered into in the second quarter of fiscal 2016, as compared to fiscal 2015. See Note 16 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for more information.

•	Provision for income taxes increased primarily due to state taxes.

•

Networking Platforms segment profit increased, primarily due to higher sales volume, as described above, resulting in increased gross profits, slightly offset by increased research and development costs. Research and development costs primarily reflect increased expenses relating to the continued development of our coherent modem technology, including our WaveLogic Ai coherent optical chipset, and relocation costs in connection with our research and development center facility transitions in Ottawa, Canada.

•	Software and Software-Related Services segment profit increased, reflects higher sales volume, as described above, and improved gross margin, partially offset by increased research and development costs. Research and development costs primarily reflect increased expenses relating to the continued development of our Blue Planet software platform.

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

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•	Networking Platforms segment profit increased, primarily due to higher sales volume, as described above, and improved gross margin, partially offset by higher research and development costs. The improved gross margin was the result of product cost reductions, including on our WaveLogic coherent optical processor for 100G and 200G optical transport, partially offset by market-based price erosion.

•	Software and Software-Related Services segment profit increased primarily reflecting higher sales volume, partially offset by higher research and development costs and reduced gross margin from increased amortization of intangibles expense. Higher research and development costs reflect the addition of expenses relating to the development of our Blue Planet software platform.

•	Global Services segment profit increased, primarily due to higher sales volume, as described above, and improved gross margin. The improved gross margin was the result of improved efficiencies for consulting and network design services.

•	reduce the principal balance of our outstanding Term Loans by $93.6 million in connection with the refinancing and consolidation of our 2019 and 2021Term Loans into a new 2022 Term Loan.

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•	The $66.1 million of cash used in accounts receivable during fiscal 2017 reflects higher sales volume in the fourth quarter of fiscal 2017 as compared to fiscal 2016;

•	The $91.6 million in cash used in inventory during fiscal 2017 primarily reflects increases in finished goods to meet customer delivery schedules;

•	Cash used in prepaid expenses and other during fiscal 2017 was $33.8 million, primarily reflecting higher prepaid value added taxes and higher deferred deployment expense;

•	The $33.9 million of cash provided by accounts payable, accruals and other obligations during fiscal 2017 reflects increased inventory purchases at the end of fiscal 2017; and

•	The $2.0 million of cash provided by deferred revenue represents an increase in advanced payments received from customers prior to revenue recognition.

(1)	The final interest payment owing on our 0.875% Convertible Senior Notes, due June 15, 2017 was paid during the third quarter of fiscal 2017.

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(2)	Interest on our outstanding 3.75% Convertible Senior Notes, due October 15, 2018, is payable on April 15 and October 15 of each year.

(3)	Interest on our outstanding 4.0% Convertible Senior Notes, due December 15, 2020, is payable on June 15 and December 15 of each year.

(4)

Interest on the 2019 Term Loan was payable periodically based on the underlying market index rate selected for borrowing. The 2019 Term Loan bore interest at LIBOR plus a spread of 3.00% subject to a minimum LIBOR rate of 0.75%. On the first day of our second quarter of fiscal 2017, we refinanced and replaced this term loan with the 2022 Term Loan. See Note 16 to our Consolidated Financial Statements included in Item 8 of Part II of this report for more information.

(5)

Interest on the 2021 Term Loan was payable periodically based on the underlying market index rate selected for borrowing. The 2021 Term Loan bore interest at LIBOR plus a spread of 3.25% to 3.50% subject to a minimum LIBOR rate of 0.75%. On the first day of our second quarter of fiscal 2017, we refinanced and replaced this term loan with the 2022 Term Loan. See Note 16 to our Consolidated Financial Statements included in Item 8 of Part II of this report for more information.

(6)	Interest on the 2022 Term Loan is payable periodically based on the underlying market index rate selected for borrowing. The 2022 Term Loan bears interest at LIBOR plus a spread of 2.5% subject to a minimum LIBOR rate of 0.75%. As of the end of fiscal 2017, the interest rate on the 2022 Term Loan was 3.74%.

(7)

Prior to the term loan refinancing, payments on our interest rate swaps were variable and effectively fixed the total interest rate under the 2019 Term Loan at 5.004% from July 20, 2015 through July 19, 2018 and the 2021 Term Loan at 4.62% to 4.87%, depending on applicable margin, from June 20, 2016 through June 22, 2020. In connection with the refinancing of the 2019 and 2021 Term Loans into the 2022 Term Loan, in order to align our interest rate hedges to the reduced 2022 Term Loan principal value and later maturity date, we reduced the total outstanding value of our interest rate swaps and also entered into new forward starting interest rate swaps in January 2017 and February 2017, respectively. The interest rate swaps, as adjusted, fix 98%, 82% and 77% of the principal value of the 2022 Term Loan from February 2017 through July 2018, July 2018 through June 2020 and June 2020 through January 2021, respectively. The fixed rate on the amounts hedged during the periods described above will be 4.25%, 4.25% and 4.75%, respectively.

(8)	During fiscal 2017, we utilized the ABL Credit Facility to collateralize certain standby letters of credit and paid $1.6 million in commitment fees, interest expense and other administrative charges relating to our ABL Credit Facility.

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(1)	Includes the accretion of the principal amount on the 4% Senior Convertible Notes, due December 15, 2020, payable at maturity at a rate of 1.85% per year compounded semi-annually, commencing December 27, 2012.

(2)	Interest on the 2022 Term Loan and payments due under the interest rate swaps is variable and calculated using the rate in effect on the balance sheet date. For additional information about our term loans and the interest rate swaps, see Notes 14 and 16 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report and Item 7A of Part II of this annual report.

(3)	Does not include variable insurance, taxes, maintenance and other costs that may be required by the applicable operating lease. These costs are not expected to have a material future impact.

(4)	Purchase obligations relate to purchase order commitments to our contract manufacturers and component suppliers for inventory. In certain instances, we are permitted to cancel, reschedule or adjust these orders. Consequently, only a portion of the amount reported above relates to firm, non-cancelable and unconditional obligations.

(5)	This represents the total minimum lease payments due for all buildings that are subject to capital lease accounting. Does not include variable insurance, taxes, maintenance and other costs required by the applicable capital lease. These costs are not expected to have a material future impact.

(6)	As of October 31, 2017, we also had $15.4 million of other long-term obligations on our Consolidated Balance Sheet for unrecognized tax positions that are not included in this table because the timing or amount of any cash settlement with the respective tax authority cannot be reasonably estimated.

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•	Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities;

•	Level 2 inputs are quoted prices for identical or similar assets or liabilities in less active markets or model-derived valuations in which significant inputs are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

•	Level 3 inputs are unobservable inputs based on Ciena's assumptions used to measure assets and liabilities at fair value.

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(1)	During fiscal 2015, Ciena recorded a charge of $8.6 million of severance and other employee-related costs associated with a workforce reduction of approximately 125 employees.

(2)	During fiscal 2016, Ciena recorded a charge of $2.8 million of severance and other employee-related costs associated with a workforce reduction of approximately 75 employees.

(3)	During fiscal 2017, Ciena recorded a charge of $5.9 million of severance and other employee-related costs associated with a workforce reduction of approximately 100 employees.

(4)	Reflects unfavorable lease commitments and relocation costs incurred in connection with our research and development center facility transitions in Ottawa, Canada

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(14)	DERIVATIVE INSTRUMENTS

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•	be subject to mandatory prepayment on the same basis as under the Term Loan Credit Agreement;

•	bear interest, at Ciena’s election, at a per annum rate equal to (a) LIBOR (subject to a floor of 0.75%) plus an applicable margin of 2.50%, or (b) a base rate (subject to a floor of 1.75%) plus an applicable margin of 1.50%; and

•	be repayable at any time at Ciena's election, provided that repayment of the 2022 Term Loan with proceeds of certain indebtedness prior to July 30, 2017 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment.

(1)	Includes unamortized debt discount and debt issuance costs.

(2)	Ciena's term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2022 Term Loan using a market approach based upon observable inputs, such as current market transactions involving comparable securities.

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(1)	The convertible notes were categorized as Level 2 in the fair value hierarchy. Ciena estimates the fair value of its outstanding convertible notes using a market approach based on observable inputs, such as current market transactions involving comparable securities.

(2)	Includes unamortized discount.

(3)	Includes unamortized discount and accretion of principal.

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(1)

Since Ciena expects to settle the principal amount of the outstanding 3.75% Convertible Senior Notes due 2018 (New Notes) in cash, Ciena uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread on 14.3 million shares that were converted to the New Notes will have a dilutive impact on diluted net income per share of common stock when the average market price of the Ciena common stock for a given period exceeds the conversion price of $20.17 per share for the New Notes. During the fourth quarter of fiscal 2017, the average market price of the common stock was $22.74 which was above $20.17, as such, the New Notes are dilutive by the conversion spread, or 0.4 million shares.

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•	Networking Platforms reflects sales of Ciena’s Converged Packet Optical, Packet Networking and Optical Transport product lines.

◦

Converged Packet Optical — includes the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, which feature Ciena's WaveLogic coherent optical processors. Products also include the Waveserver stackable interconnect system, the family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform.

◦	Packet Networking — 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 and the Ethernet packet configuration for the 5410 Service Aggregation Switch.

◦

Optical Transport — includes the 4200 Advanced Services Platform, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL) and 6100 Multiservice Optical Platform. As of the end of fiscal 2017, the Optical Transport products have either been previously discontinued, or are expected to be discontinued, reflecting network operators’ transition toward next-generation converged network architectures and stackable interconnect platforms addressed by solutions within our Converged Packet Optical product line. Accordingly, commencing in fiscal 2018, sales of Optical Transport will be reflected within the Converged Packet Optical product line of our Networking Platforms segment.

◦

This segment includes Ciena’s element and network management solutions and planning tools, including the OneControl Unified Management System, ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. As Ciena seeks adoption of its Blue Planet software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other element and network management solutions.

◦	This segment includes Ciena’s Blue Planet network virtualization, service orchestration and network management software platform. Ciena's Blue Planet platform includes multi-domain service orchestration

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

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•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Ciena Corporation;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America;

•	provide reasonable assurance that receipts and expenditures of Ciena Corporation are being made only in accordance with authorization of management and directors of Ciena Corporation; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.

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(a)	1.      The information required by this item is included in Item 8 of Part II of this annual report.

2.	The information required by this item is included in Item 8 of Part II of this annual report.

3.	Exhibits: See Index to Exhibits, which is incorporated by reference in this Item. The Exhibits listed in the accompanying Index to Exhibits are filed herewith or incorporated by reference as part of this annual report.

(b)	Exhibits. See Index to Exhibits, which is incorporated by reference in this Item. The Exhibits listed in the accompanying Index to Exhibits are filed herewith or incorporated by reference as part of this annual report.

(c)	Not applicable.

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