936395--1/10/2007--CIENA

related topics

{customer, product, revenue}

{system, service, information}

{product, market, service}

{operation, international, foreign}

{tax, income, asset}

{acquisition, growth, future}

{cost, operation, labor}

{property, intellectual, protect}

{personnel, key, retain}

{debt, indebtedness, cash}

{control, financial, internal}

{cost, contract, operation}

{condition, economic, financial}

Our gross margin may fluctuate from quarter to quarter and our product gross margin may be adversely affected by a number of factors, some of which are beyond our control. A small number of our telecommunication service provider customers accounted for a significant portion of our revenue in fiscal 2006. The loss of one or more of these customers, reductions in spending or changes affecting the market for telecommunications service providers generally, could negatively affect our business, financial condition and results of operations. Network equipment sales to large communications service providers often involve lengthy sales cycles and protracted contract negotiations and may require us to assume terms or conditions that negatively affect our pricing, payment and timing of revenue recognition. We may invest development resources in products or technologies for which market demand is lower than anticipated. Product performance problems could damage our business reputation and negatively affect our results of operations. We may be required to write off significant amounts of inventory. Continued shortages in component supply or manufacturing capacity could increase our costs, adversely affect our results of operations and constrain our ability to grow our business. We may not be successful in selling our products into new markets and developing and managing new sales channels. We may experience delays in the development and enhancement of our products that may negatively affect our competitive position and business. We must manage our relationships with contract manufacturers to ensure that our product requirements are met timely and effectively. We depend on a limited number of suppliers, and for some items we do not have a substitute supplier. Our failure to manage our relationships with service delivery partners effectively could adversely impact our financial results and relationship with customers. We may incur significant costs and our competitive position may suffer as a result of our efforts to protect and enforce our intellectual property rights or respond to claims of infringement from others. Our international operations could expose us to additional risks and result in increased operating expense. Our efforts to offshore certain development resources and operations to India may not be successful and may expose us to unanticipated costs or liabilities. Our exposure to the credit risks of our customers and resellers may make it difficult to collect receivables and could adversely affect our operating results and financial condition. Efforts to restructure our operations and align our resources with market opportunities could disrupt our business and affect our results of operations. If we are unable to attract and retain qualified personnel, we may be unable to manage our business effectively. We may be required to assume warranty, service, development and other unexpected obligations in connection with our resale of complementary products of other companies. Strategic acquisitions and investments may expose us to increased costs and unexpected liabilities. We may be required to take further write-downs of goodwill and other intangible assets. We may be adversely affected by fluctuations in currency exchange rates. Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price. Our business is dependent upon the proper functioning of our information systems and upgrading these systems may result in disruption to our operating processes and internal controls. Obligations associated with our outstanding indebtedness on our convertible notes may adversely affect our business.

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936395--1/10/2007--CIENA_CORP