Fiscal 2014 was another record year in which we continued to generate differentiated financial performance while delivering steady progress toward our longer term strategic objectives and financial targets. In particular, we strengthened our platform for growth and increased profitability by further diversifying our business across network providers of every type and in additional geographies. And, our efforts continue to be rewarded with increased market share and more recognition of our technology leadership by the industry. We believe that we have the momentum to address the strategic needs of the market for years to come.

Driving the Market Evolution

For the last several years, we have been designing our business based on our expectations that the industry would evolve toward cloud and on-demand networking. The market is now clearly heading in this direction. In fact, the cloud has hastened the shift toward on-demand networking to the point where it is the principal driver in the network architecture evolution, which is causing traditional network domains to be viewed differently.

More specifically, domains that have historically been referred to as core and metro are evolving to a simpler topology that reflects more cloud-centric usage—connecting users to their data, which we refer to as Content-to-User, and connecting data centers together, which we refer to as Content-to-Content. Our OPⁿ network architecture that we announced three years ago not only aligns well with this shift, it also is serving to facilitate this evolution for our customers.

Expanding Our Opportunities

Diversification is a key pillar to our growth and leverage going forward, and we are addressing a comprehensive set of opportunities. During the past few years we have steadily increased our revenue from non-telecommunications customers, including cable operators (Multi-Service Operators), Web-scale providers and others, who drove a combined 30+ percent revenue contribution in the fourth quarter of fiscal 2014.

This diversification strategy, combined with our historical strength in the service provider market, allows us to address both Content-to-Content and Content-to-User opportunities. The primary owners of the Content-to-User domain are service providers, which have invested billions of dollars to build and manage networks that deliver content to their customers—whether they are enterprise, mobile or residential. Web-scale providers, including providers of search, social networking and web services, as well as other emerging network operators such as data center and Ethernet exchange operators, are also critical players in this evolving ecosystem as they assume a lead role in connecting content across data centers (the Content-to-Content domain).

Ciena is uniquely positioned to serve both of these network domains, and our position in each area is market leading. In November 2014, Infonetics released its global 2014 Service Provider Vendor report in which Ciena was again named the overall #1 optical supplier, taking the leading spots for Packet-Optical Systems, Optical Transport and Switching, and Transport SDN and Control Plane. And, in January 2015, in what we believe is the first survey covering the Web-scale market, Ovum identified Ciena as the market leader in the Data Center Interconnect market in North America. It is important to note that in addition to our direct sales to this customer segment, Web-scale providers buy enormous amounts of network capacity from Ciena’s traditional top tier service provider and submarine customers, making our total Web-scale position even more market leading.

Clearly, Web-scale is not just a market; it’s a demand driver. And as the cloud ecosystem develops, the roles of service providers and the Web-scale community are increasingly interdependent and dynamic. To build the global, on-demand environment that the cloud requires, you must be working closely with both global Tier 1 service providers and the major Web-scale players. Ciena’s leading position with both sets of buyers gives us a unique competitive advantage in building out global, on-demand networks for the cloud in 2015, and over the long term.

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Our Investments Continue to Yield Results

Over the years we have taken deliberate steps to invest strategically in the business, enhance our positioning and extend our leadership. From evolving our go-to-market strategies to product advancements, these investments continue and our resulting progress is clear.

In 2014 we established a number of new relationships. We entered into a strategic global partnership with Ericsson that includes the distribution of our packet-optical solutions—as well as other initiatives. We also developed new relationships with a number of key international customers, such as TeliaSonera and a Tier 1 operator in Brazil. And we expanded our relationships with Vodafone and Liberty Global, the largest Multi-Service Operator outside of North America. An outcome of these efforts as well as many others was a 12 percent increase in absolute dollars of our international revenue in fiscal 2014, which demonstrates our success in growing our business globally.

We also made great strides with our portfolio, including the launch of a completely new Ethernet platform as well as a new set of software solutions, both of which expand our addressable markets and, we believe, bolster our leadership position.

Three months after announcing our 8700 Packetwave Platform, the product received top honors in Broadband Technology Report’s 2014 Diamond Innovation Awards. As of January 2015, we already had eleven customers for the platform, which is squarely aimed at addressing the growth in metro and data center networking opportunities.

The newest addition to our portfolio, Agility Matrix, demonstrates our commitment to approaches and architectures that are more flexible and software-enabled. We have established Agility, a new division, to underpin this strategic technology focus that drives both our innovation and go-to-market strategy in this area. At its core, we believe Agility Matrix is game-changing with a set of solutions that includes a Virtual Network Functions (VNF) online marketplace as well as network-level applications. Working with several major software partners, Ciena is championing the open ecosystem for the cloud—transforming raw capacity into capability that delivers on-demand network-based services. All of these steps allow our customers to offer a broader array of on-demand services to their end customers.

A Strong Finish

As we look back on fiscal 2014, it is clear that our unique strategy and leadership continued to translate into strong financial results. We gained market share and grew the top line by 10 percent. Moreover, we delivered profitable growth. Our adjusted operating margin was 6.5 percent, reflecting a 28 percent increase in our adjusted operating profit.

This progress could not have been achieved without the support of our ecosystem. As always, many thanks go to our customers, partners, employees and stakeholders. We look forward to another prosperous year together.

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Gary B. Smith

President and Chief Executive Officer