Analyst Day October 10, 2006 Vinay Rathore Director of Marketing Service-centric transport infrastructure Ciena Proprietary
Key drivers for the optical infrastructure Services Scalability Cost 2006 Ciena Corporation - Proprietary 2
Services Ciena Proprietary
What are the end user services Consumer VoD, Internet, IPTV, multi-play services, VoIP, FTTx, 3G Enterprise IP, storage, BC/DR, distributed/grid computing, virtualization Optical Services TDM Storage Video Ethernet Advanced Ethernet Service Provider Ethernet for network interconnection, flexibility, automation 2006 Ciena Corporation - Proprietary 4
The change in Ethernet service mix $ Millions $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- Global Ethernet Services Revenues 2006 2007 2008 2009 2010 Intercity E-LAN Intercity E-Line Metro E-LAN Metro E-Line Ports (Thousands) 900 800 700 600 500 400 300 200 100 0 Global Enterprise Ethernet Services Ports 2006 2007 2008 2009 2010 Ethernet-over-WDM Ethernet-over-Fiber Ethernet-over-MPLS Copper Access Ethernet-over-SDH 39% CAGR for inter-city E-LAN (faster than any other ) Source: Ovum-RHK 25% CAGR metro E-LAN (2 nd fastest growing) 2006 Ciena Corporation - Proprietary 5
Optimizing SONET/SDH for Ethernet Ethernet & Mesh, a match made in heaven Primary Path Sub-optimal Wastes capacity Limited resiliency in catastrophic outage Protection path Ethernet over traditional SONET/SDH Ring $$$ Ethernet over MESH $» Leverages dual homing & diverse routing» Increases usable capacity» Protect against node, fiber and card failures 2006 Ciena Corporation - Proprietary 6
How standards can help OTN: Optimizing Ethernet transport SONET/SDH High cost Data unfriendly 10 GigE LAN PHY not supported Standards based Service management Transparency ITU G.709 Defined PM & OA&M ANSI & ETSI OTN WDM Fixed wavelength capacity Non-standard physical PM Ethernet Undefined OA&M No physical layer PM No legacy support 10GigE LAN PHY friendly Benefits of OTN Multi-service technology Resiliency/PM/OA&M for Ethernet Transparent support for SONET/SDH Defines WDM (optical) management 10GbE friendly (LAN/WAN Phy) Cross network transparency 2006 Ciena Corporation - Proprietary 7 2006 Ciena Corporation - Proprietary 7
How FlexSelect technology can help Enabling the service evolution Flexible hardware elements On-demand programmable optics Pluggable and tunable optics Standards-based OTN (ITU G.709) Transparent support of any protocol Service management Intelligent devices automate provisioning Service level management SONET /SDH Storage Ethernet 10/100 GbE/10GbE Programmable hardware Payload Overhead G.709 Digital Wrapper Encapsulation C/DWDM OTU1 / OTU2 Overhead w / GCC0 Management bytes Optimally groomed wavelengths 2006 Ciena Corporation - Proprietary 8
FlexiPort Ciena s unique service enabling capability Traditional approach Programmable approach { Many Line Cards OC-3 OC-12 OC-48 Fibre Channel Gb Ethernet ESCON Video Fast Ethernet 66% fewer spares 95% faster provisioning } 1 x Line Card Any Service Any Speed Any Port Any Time } OC-3 OC-12 OC-48 Fibre Channel Gb Ethernet ESCON Video Fast Ethernet Network or Client Benefits ` One card, one spare Faster service delivery Packet friendly Lower costs, higher profitability 2006 Ciena Corporation - Proprietary 9
Optimizing optical networks for data services Standards-based pseudowires (PWE3) over IP/MPLS networks Optical and data services over a single converged network Preservation of customer experience despite change in underlying transport OTN Metro Network Multiservice Pseudowires (FR, ATM, TDM, Ethernet) Converged IP/MPLS OTN Metro Network Enhanced OAM, network resiliency, and QoS Transport LSP Ethernet Pseudowire TDM Pseudowire ATM Pseudowire Frame Relay Pseudowire 2006 Ciena Corporation - Proprietary 10
Ensuring automated services management Usually an after-thought Granular service levels per customer Eliminates human provisioning errors Provisions, manages resources & services Customer benefit Value-added reports Correlate outages to customers Notifies customers/service centers/technicians Provider benefits SLA violation and verification reports Network performance reports Lower expenses 2006 Ciena Corporation - Proprietary 11
Scaling the service-enabled network Ciena Proprietary
Segmenting the network scalability requirements PHL SFO Metro NY Metro DC LAS LAX Metro Regional Long Haul Metro Network Multiple direct customer service interfaces (storage, TDM, Ethernet) Small size, low power & multiple services Regional Networks Regional area interconnection (CO, customer, Ethernet, TDM) Must balance customer and reasonable port counts Long-haul Networks Primarily backbone interconnections routers, switches, MSPPs, etc. Critical factor: high port count per fiber 2006 Ciena Corporation - Proprietary 13
Scalability challenges PHL SFO Metro NY Metro DC LAS LAX Metro Regional Long Haul Each network is defined, built & managed separately Not all elements support alien wavelengths OPEX & management drives up cost and limits scalability 2006 Ciena Corporation - Proprietary 14
FlexSelect Architecture (FSA) Rising to the occasion NY Metro PHL SFO LA Metro DC Vegas Smooth path to convergence with plenty of bandwidth 10G for TDM, IP and Ethernet Field-proven 40G today, ready for migration to 100G Shared line card, programmable interfaces, service-oriented Integrated network and services management Dramatic cost reduction and improved flexibility Standards-based approach with alien wavelength support Metro Regional Long Haul Network intelligence for automated point-and-click provisioning 2006 Ciena Corporation - Proprietary 15
Scaling infrastructure for IP/Ethernet growth OTN / ITU G.709 / digital wrapper Scales 10G Ethernet LAN PHY (unlike SONET/SDH) Extends OA&M of a network Combined optical/data/ethernet solution Migrate FR/ATM/broadband networks to Ethernet Migrate wireless backhaul infrastructure from 2G 2.5G 3G 100,000s of services over existing IP/MPLS networks (PWE3) New services (and legacy) 2006 Ciena Corporation - Proprietary 16
Why FSA scales better? Managing the growth Programmability maximizes potential from network investments Shared hardware design Legacy/revenue protection Practical migration solutions ensure service scalability 2006 Ciena Corporation - Proprietary 17
Cost considerations Ciena Proprietary
Optimizing cost in reconfigurable WDM Hybrid ROADM combines OOO & OEO technology Routes wavelength services 155Mb to 10G anywhere on the network Electrical grooming optimizes wavelength utilization for <10G (78%) Optical routing dynamically adds/drops wavelengths (10/40G) to 8 degrees Delivers on-demand high bandwidth services any port to any port 2006 Ciena Corporation - Proprietary 19
The business case for hybrid ROADM The economics of eroadm Cost Per Bit Wavelength (λ) switching only Sub λ switching only Hybrid combination of wave + sub-wave switching Benefits Lower cost, improved scalability Pay as you grow Lower cost eroadm frees resources, enables smooth 10G migration Low start-up costs with scalability to optical ROADM as needs dictate Flexible assignment of low/high granularity bandwidth Bandwidth requirement (bits/second) 2006 Ciena Corporation - Proprietary 20
Flexible solutions for fixed-mobile convergence OPEX Control Through Backhaul Optimization Benefits Operational Costs Flatten 3G bandwidth OPEX costs through highly costeffective and efficient packet aggregation and transmission 3G (TDM-only) Private infrastructure provides dramatic OPEX reduction with ROI in less than 12 months Carrier-class (99.9999%) availability B/W demand over time 3G (Packet Aggregated) 2G Multi-protocol, multiservice support provides future-proofed seamless migration for 2G, 2.5G and 3G wireless networks 2006 Ciena Corporation - Proprietary 21
Mesh analysis capex impact Base assumptions Mesh network capacity supports 100% restoration for any single fiber bundle (fiber conduit) failure Ring network is 4 fiber asymmetrical ring or linear APS protection (in asymmetrical rings, working lines are only placed where traffic is required) 2006 Ciena Corporation - Proprietary 22
Benefits analysis of flexible solutions 95% reduction in provisioning time Eliminates man hours & truck rolls for add/change/move Reduce equipment planning 66% reduction in spares by 78% reduction in wavelength usage On-demand sub-wavelength routing Deliver new optical services 2006 Ciena Corporation - Proprietary 23
Conclusions Three elements of differentiation for service providers Services Ability to offer flexibility & service enablement Scalability Optical & Ethernet services must be successfully blended for growth Cost Standards-based solutions lower cost with backward & forward compatibility to drive overall lower TCO FlexSelect: the service enabling architecture 2006 Ciena Corporation - Proprietary 24
Afternoon Q&A Session The webcast of Ciena s Analyst Day 2006 is listen-only. We apologize that we cannot take questions from webcast participants. Ciena Proprietary
Thank You Ciena Contact Info: Investor Relations ir@ciena.com Public Relations pr@ciena.com Industry Analyst Relations kjohnson@ciena.com 2006 Ciena Corporation - Proprietary 26