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Tom Mock Sr. Vice President, Strategic Planning June 3, 2004

Friedman Billings Ramsey 8 th Annual Growth Investor Conference. CIENA: Beyond Optical. Tom Mock Sr. Vice President, Strategic Planning June 3, 2004. Forward-Looking Statements .

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Tom Mock Sr. Vice President, Strategic Planning June 3, 2004

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  1. Friedman Billings Ramsey 8th Annual Growth Investor Conference CIENA: Beyond Optical Tom MockSr. Vice President, Strategic Planning June 3, 2004

  2. 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 April 30, 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.

  3. Agenda • CIENA’s approach • Where we were • What changed? • CIENA: Beyond optical • CIENA’s Transformation: Beyond the product portfolio

  4. Equipment Vendor Options AlcatelLucent Nortel Sonus AFCI Cisco Sycamore Juniper Siemens Tellabs Corvis Enter New Markets Expand w/inExisting Mkt Cut Costs (Limit Products/Markets) RadicallyAlter BusinessModel Do Nothing CIENA’s approach: Designed to enable stronger long-term revenue/earnings growth potential vs. short-term profitability with nothing to fuel growth forward

  5. Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Core Optical Switching Core Optical Switching Core Optical Switching Core Optical Switching Core Optical Switching Core Optical Switching Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Long Haul DWDM Transport Core Optical Switching Core Optical Switching Core Optical Switching Core Optical Switching Core Optical Switching Core Optical Switching $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 700 700 700 700 700 700 600 600 600 600 600 600 43% 43% 43% 43% 43% 43% 43% 43% 43% 43% 43% 43% 500 500 500 500 500 500 $ / Mbps $ / Mbps $ / Mbps $ / Mbps $ / Gb/s 400 400 400 400 400 400 99% 99% 99% 99% 99% 99% 99% 99% 99% 99% 99% 99% $ Millions $ Millions $ Millions $ Millions $ Millions $ Millions $ Millions $ Millions $ Millions $ Millions $ Millions $ Millions $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 $25 300 300 300 300 300 300 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 16% 36% 36% 36% 36% 36% 36% 36% 36% 36% 36% 36% 36% 200 200 200 200 200 200 Capex Capex Capex Capex Capex Capex 100 100 100 100 100 100 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 0 0 0 0 0 0 CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX OPEX OPEX OPEX OPEX OPEX OPEX REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE CAPEX CAPEX CAPEX CAPEX CAPEX CAPEX OPEX OPEX OPEX OPEX OPEX OPEX REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE Traditional Traditional Traditional Traditional Traditional Traditional Traditional Traditional Traditional Traditional Traditional Traditional CIENA CIENA CIENA CIENA CIENA CIENA CIENA CIENA CIENA CIENA CIENA CIENA 1996 1996 1996 1996 1996 1996 - - - - - - 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 - - - - - - 2003 2003 2003 2003 2003 2003 1996 1996 1996 1996 1996 1996 - - - - - - 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 - - - - - - 2003 2003 2003 2003 2003 2003 CIENA Led the Optical Core Revolution Success driven by disruptive economics Core Network CoreStream™ CoreDirector™

  6. CIENA’s Optical Switching Leadership CIENA Cumulative Optical Switch Capacity Shipped Relative To Remaining Competitors, 2001 – Q203 60 • More optical switch capacity than all other competitors combined. • Shipped 630+ optical switches; >70% can switch 640G • Built the world’s largest intelligent optical switch network: 115+ switches • 20+ customers have field deployed at least 10 switches each • 30+ customers on 4 major continents 50 40 Relative Optical Switching Capacity 30 20 4.4x 6 x 9 x 10 18 x 23 x 66 x 0 CIENA LUCENT ALCATEL SYCAMORE NORTEL CISCO MARCONI Source: Dell’Oro Q303 report for relative switching capacity. Excludes the former Tellium switch, which appears to be no longer offered after Zhone acquired Tellium.

  7. ONLINE™ Metro MetroDirectorK2™ ONLINE Edge CIENA’s Optical Portfolio Expansion Access Network Core Network Metro Network CoreStream™ CoreDirector™

  8. …and spending has shifted to service delivery The Operators’ “pain point” has moved… Core Optical Market is in Decline 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. Source: Infonetics, Dell’Oro, CIENA Internal Estimates

  9. VoD/HDTV Services Voice/video/ DSL Services MPLS/ATM/FR Services IP Services Storage Services ONLINE™ Metro Ethernet Services Private Line Services MetroDirectorK2™ ONLINE Edge Capturing Services Revenue Access Network Core Network Metro Network An intelligent optical core enables an all-service network, but CIENA’s portfolio lacked service delivery platforms customers needed to capture new revenue growth CoreStream™ CoreDirector™

  10. Preserve the Core; Expand Service Portfolio Video on Demand HDTV VoIP Ethernet Storage Private Lines Internet Access DSL IP VPNs • 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

  11. CIENA’s Acquisition/Partnership Goals • Expand addressable market with service delivery platforms • Leverage core leadership/strengths • Leverage customer base/relationships • Improve CIENA’s business model • Drive revenue growth • Improve gross margins • Push toward sustained profitability

  12. 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

  13. CIENA’s Expansion into Service Delivery Estimated Global Market Opportunity from Recent Acquisitions $8,000 $7,000 $6,000 $5,000 $ (Millions) $4,000 $3,000 $2,000 $1,000 $- 2003 2004 2005 2006 2007 Wavesmith Akara Internet Photonics Catena (June 2003) (Sept 2003) (May 2004) (May 2004) Sources include: Yankee Group, April 2004; Infonetics, May 2004; IDC, January 2004; RHK, March 2004; and CIENA internal estimates.

  14. VoD/HDTV Services Laurel Partnership Sept 2003 Voice/video/ DSL Services Internet Photonics Catena DN™ Series MPLS/ATM/FR Services IP Services CN™ 2000 ST™ (Laurel) Storage Services ONLINE™ Metro PacketWave™ (Luminous) Ethernet Services Private Line Services MetroDirectorK2™ Luminous Partnership Sept 2003 CN 2600(formerly ONLINE Edge) Capturing Services Revenue Access Network Core Network Metro Network CoreStream™Agility CoreDirector™

  15. Residence Converged Multi-service Core Large Enterprise Bundled Service Delivery To Large Enterprises (Service Provider Case) Service End-User Network Layer 2/3 Layer 2/3 SLC-5 Video CNX-5 ST 200 Internet Access Voice CN1000 PL FR Ethernet IP VPN Storage ATM  CN 2600 Small & Medium Enterprise CN 4310 Layer 1/2 CN 4310 • Improved margins on storage & ethernet services • Economical sub-rate storage over anything (CN2000) • Economical metro ethernet (CN 4310) • Deliver high-value managed storage services • Enhanced service monitoring & demarcation (CN2000) Note:  services also enabled by CoreDirector, CoreStream Agility, and ONLINE Metro

  16. Residence Converged Multi-service Core CMTS Large Enterprise Bundled Service Delivery To Residential Consumers (MSO Case) Service End-User Network Hub Headend Cable Modem Layer 2/3 Video VOD Server Cluster Internet Access Set-Top Voice QAM PL Ethernet IP VPN Storage  Small & Medium Enterprise CN 2300 CN 4300 Layer 1/2 • Improved margins on storage & ethernet services • Economical sub-rate storage over anything (CN2000) • Economical metro ethernet (IPI 4300) • Deliver high-value managed storage services • Enhanced service monitoring & demarcation (CN2000)

  17. Multiservice Access CIENA’s Solutions Portfolio – Core to Door Broadband Access Multiservice Edge Switching Core Transport & Switching Metro Transport & Switching

  18. Multiservice Access CIENA’s Solutions Portfolio – Core to Door Broadband Access Multiservice Edge Switching 1000 Series 7000 Series CNX 5, CN™ 1000 DN™ 7000, DN 7050, DN 7100, DN 7200 Core Transport & Switching 10000 Series CoreDirector™ CoreStream™ CoreDirector CI CoreStream Agility Metro Transport & Switching 4000 Series CN 4300, CN 4310, ONLINE™ Metro MetroDirector K2™ 2000 Series CN 2000, CN 2100, CN 2110, CN 2130, CN 2200, CN 2300, CN 2600

  19. CIENA’s Transformation: Beyond the Product Portfolio • Shifting investment focus from core to access/service delivery • Committed to maintaining technology leadership in the core • Leveraging 2002-2003 investments: • CoreStream Agility, new core transport platform won Gig-BE and MCI • Enhanced CoreDirector features/functionality • Anticipate exceeding previous cost reduction goals • Expected 10% to 20% ongoing opex reduction in FY ’04. • Now expect cost savings will be ~30%

  20. Focused Cost Reduction $140,000 1st full qtr of ONI-related expenses $120,000 25% $100,000 $90-$94m Guidance $80,000 G&A $65-$70m S&M $60,000 R&D $40,000 $20,000 $0 Q1'02 Q2'02 Q2'03 Q3'03 Q4'03 Q3'02 Q4'02 Q1'03 Q1'04 Q2'04 Q3'04 Q4 '04 Q1 ‘05

  21. Focused Cost Reduction $140,000 1st full qtr of Catena & IPI expenses $120,000 35% $100,000 $90-$94m Guidance $80,000 G&A $65-$70m S&M $60,000 R&D $40,000 $20,000 $0 Q1'02 Q2'02 Q2'03 Q3'03 Q4'03 Q3'02 Q4'02 Q1'03 Q1'04 Q2'04 Q3'04 Q4 '04 Q1 '05

  22. Focused Cost Reduction $140,000 $120,000 Up to 44% $100,000 Guidance $80,000 G&A S&M $60,000 R&D $40,000 $20,000 $0 Q1'02 Q2'02 Q2'03 Q3'03 Q4'03 Q3'02 Q4'02 Q1'03 Q1'04 Q2'04 Q3'04 Q4 '04 Q1 '05

  23. CIENA’s Transformation: Beyond the Product Portfolio • Shifting investment focus from core to access/service delivery • Committed to maintaining technology leadership in the core • Leveraging 2002-2003 investments: • CoreStream Agility, new core transport platform won Gig-BE and MCI • Enhanced CoreDirector features/functionality • Anticipate exceeding previous cost reduction goals • Expected 10% to 20% ongoing opex reduction in FY ’04. • Now expect cost savings will be ~30% • 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

  24. Q3 ’04 Expected Cash Use CIENA’s Strong Cash Position Q2 ‘04 Cash used in Q2 ’04: $60 million Cash & Cash Equiv Balance: $1.5 billion Operating cash: ~$60-$65 million Expected Deal & Restructuring cash use: ~$25 million Short-term quarterly cash use target: $50-$70 million Long-term Debt $690 million 3.75% converts due 2008

  25. FY ’01 $1.6 billion FY ’02 $361 million Core Networking Service/Tech Support Metro Networking Solutions & Software Transforming CIENA to Encompass Broadband Service Delivery From (2003) To Include (2005) CAPEX/OPEX Savings Service Revenues Value Proposition Technologies Core Optical Broadband Edge & Access High Quality/Low Volumes Direct Sales Only Low Cost/High Volumes Channels/Enterprise Pull Competencies FY ’03 $283 million FY ’04 (stated goal prior to Catena & IPI) Data Networking/ Service Delivery T.B.D.

  26. Thank You!

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