Ciena's telecom equipment gathers a thousand points of light and hurtles them down fiber optic cables at the same time. By transmitting multiple light signals simultaneously the company's transport and switching equipment increases the capacity of long-distance fiber-optic networks. It also sells optical transport systems for metro and enterprise wide-area networks, as well as broadband access products that enable communications companies to deliver internet protocol (IP) services, such as VoIP, IP video, and DSL. Ciena serves telecommunications service providers, cable companies, large enterprises, and government entities.
Ciena operates in three segments: Networking Platforms, Global Services, and Software and Software-Related Services.
Networking Platforms is the company's money generator, accounting for about 80% of sales. It supplies hardware and software that includes the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System. The segment also sells operating system software.
Global Services, about 15% of sales, provides services such as consulting, network design, installation and deployment, maintenance support, and training.
The small but growing Software and Software-Related Services segment, about 5% of sales, includes network virtualization, management, control and orchestration software, and software-related services such as subscription, installation, support, and consulting services.
Ciena has operations in North America, the Caribbean and Latin America, Europe, the Middle East, Africa, and the Asia/Pacific. About 60% of its sales come from customers in the US.
To produce its hardware, the company relies on contract manufacturers with plants in Canada, Mexico, Thailand, and the US.
Sales and Marketing
The company counts more than 1,300 customers such as AT&T and NASA in the US and Orange (France), Telefonica (Spain), and Vodafone (UK) overseas. It uses a direct sales force as well as resellers.
AT&T accounts for about a fifth of Ciena's revenue. Another nine customers account for about 30% of revenue.
Ciena's revenue ramped up 6% to $2.6 billion in 2016 (ended October) with rising sales in its three segments. The company's Networking Platforms business led the increase with higher sales of its 6500 Packet-Optical Platform and the 3000 and 5000 family of service delivery and aggregation switches. Software sales were boosted by an increase in subscription services. Initial sales of the company's Blue Planet software platform also pushed revenue higher. While sales rose in North America and the Asia/Pacific region, they slumped in Europe and Central and Latin America.
The company's net income jumped 520% to $73 million in 2016 from $12 million in 2015. Besides more revenue, Ciena had lower expenses in several areas including acquisitions and restructuring. The company posted its second straight year of profit in 2016, after six years of losses.
Cash flow generated by operations rose to $290 million in 2016 from about $262 million in 2015.
Ciena intends to build on its current offerings to extend its product lines. Technologies it aims to expand are the WaveLogic coherent optical processor and the high-speed indium phosphide and silicon photonics lineup acquired from TeraXion in 2016. The technologies are designed to help network operators increase performance and power and reduce costs. Ciena also invests in developing the Blue Planet software platform and integrating it across the company's portfolio. It estimates that revenue from Blue Planet could increase by $25 million in the company's 2017 fiscal year.
Playing to its strengths, the company focuses on adding new customers that operate in its base of communications service providers. It's making a strong push in high-growth markets such as the Asia-Pacific region, where its sales rose 12%, including India.
Mergers and Acquisitions
In 2016 Ciena bought TeraXion Inc., which makes high-speed photonics components (HSPC), for $32 million in cash. The acquisition gives Ciena a bigger footprint in Canada, which is home to most of its research and development team.
In 2015 Ciena acquired Cyan Inc., a provider of software and platforms for software-defined networks, for about $400 million. The addition of Cyan helps Ciena offer more comprehensive virtualized networks and on-demand services.