| SEGMENT AND ENTITY WIDE DISCLOSURES |
SEGMENT AND ENTITY WIDE DISCLOSURES Segment Reporting Ciena manages its business, measures its performance and allocates its resources based on the following operating segments: | | • | Networking Platforms reflects sales of Ciena’s Converged Packet Optical and Packet Networking product lines. |
| | ◦ | Converged Packet Optical — includes the 6500 Packet-Optical Platform, the 5430 Reconfigurable Switching System, Waveserver® stackable interconnect system, the family of CoreDirector® Multiservice Optical Switches and the OTN configuration for the 5410 Reconfigurable Switching System. This product line also includes sales of the Z-Series Packet-Optical Platform. As of the first quarter of fiscal 2018, sales of Optical Transport products are also reflected within the Converged Packet Optical product line for all periods presented. |
| | ◦ | Packet Networking — includes the 3000 family of service delivery switches and service aggregation switches and the 5000 family of service aggregation switches. This product line also includes the 8700 Packetwave Platform, the Ethernet packet configuration for the 5410 Service Aggregation Switch, and the 6500 Packet Transport System (PTS), which combines packet switching, control plane operation, and integrated optics. |
The Networking Platforms segment also includes sales of operating system software and enhanced software features embedded in each of the product lines above. Revenue from this segment is included in product revenue on the Consolidated Statement of Operations. •Software and Software-Related Services reflects sales of the following: | | ◦ | Ciena’s Blue Planet Automation Software and Services, which is a comprehensive, open software suite that allows customers to use enhanced knowledge about their network to drive adaptive optimization of their services and operations. Ciena’s Blue Planet Automation Platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), analytics, network health predictor (NHP), route optimization and assurance (ROA), inventory management and Ciena’s SDN Multilayer Controller and virtual wide area network (V-WAN) application. Ciena acquired the NHP and ROA software solutions as a part of its acquisition of Packet Design. Ciena acquired the inventory management and ROA software solutions from DonRiver and Packet Design, respectively. Services includes sales of subscription, installation, support, consulting and design services related to Ciena’s Blue Planet Automation Platform. |
| | ◦ | Ciena’s Platform Software and Services, which provides analytics, data, and planning tools to assist customers in managing Ciena’s Networking Platforms products in their networks. Ciena’s platform software includes its Manage, Control and Plan (MCP) domain controller solution, OneControl Unified Management System, ON-Center® Network and Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. As Ciena seeks further adoption of its MCP software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other platform software solutions. Software-related services includes sales of subscription, installation, support, and consulting services related to Ciena’s software platforms and operating system software and enhanced software features embedded in each of the Networking Platforms product lines above. |
Revenue from the software portions of this segment is included in product revenue on the Consolidated Statements of Operations. Revenue from services portions of this segment is included in services revenue on the Consolidated Statements of Operations. | | • | Global Services reflects sales of a broad range of Ciena’s services for consulting and network design, installation and deployment, maintenance support and training activities. Revenue from this segment is included in services revenue on the Consolidated Statement of Operations. |
Ciena’s long-lived assets, including equipment, building, furniture and fixtures, finite-lived intangible assets, and maintenance spares, are not reviewed by the chief operating decision maker for purposes of evaluating performance and allocating resources. As of October 31, 2018, equipment, building, furniture and fixtures totaling $292.1 million primarily supports asset groups within Ciena’s Networking Platforms and Software and Software-Related Services segments and Ciena’s unallocated selling and general and administrative activities. As of October 31, 2018, $29.7 million of Ciena’s intangible assets were assigned to asset groups within Ciena’s Networking Platforms segment and $118.5 million of Ciena’s intangible assets were assigned to asset groups within Ciena’s Software and Software-Related Services segment. As of October 31, 2018, all of the maintenance spares totaling $45.7 million were assigned to asset groups within Ciena’s Global Services segment.
Segment Revenue The table below (in thousands, except percentage data) sets forth Ciena’s segment revenue for the respective periods indicated: | | | | | | | | | | | | | | Year Ended October 31, | | 2018 | | 2017 | | 2016 | Revenue: | | | | | | Networking Platforms | | | | | | Converged Packet Optical | $ | 2,194,519 |
| | $ | 1,939,621 |
| | $ | 1,815,921 |
| Packet Networking | 283,499 |
| | 313,089 |
| | 252,862 |
| Total Networking Platforms | 2,478,018 |
| | 2,252,710 |
| | 2,068,783 |
| | | | | | | Software and Software-Related Services | | | | | | Platform Software and Services | 173,949 |
| | 145,009 |
| | 117,251 |
| Blue Planet Automation Software and Services | 26,764 |
| | 16,110 |
| | 7,818 |
| Total Software and Software-Related Services | 200,713 |
| | 161,119 |
| | 125,069 |
| | | | | | | Global Services | | | | | | Maintenance Support and Training | 245,161 |
| | 227,400 |
| | 228,982 |
| Installation and Deployment | 128,829 |
| | 117,524 |
| | 130,916 |
| Consulting and Network Design | 41,565 |
| | 42,934 |
| | 46,823 |
| Total Global Services | 415,555 |
| | 387,858 |
| | 406,721 |
| | | | | | | Total revenue | $ | 3,094,286 |
| | $ | 2,801,687 |
| | $ | 2,600,573 |
|
Segment Profit Segment profit is determined based on internal performance measures used by Ciena’s chief executive officer to assess the performance of each operating segment in a given period. In connection with that assessment, the chief executive officer excludes the following items: selling and marketing costs; general and administrative costs; amortization of intangible assets; acquisition and integration costs; significant asset impairments and restructuring costs, interest and other income (loss), net; interest expense; loss on extinguishment of debt; and provision (benefit) for income taxes. The table below (in thousands) sets forth Ciena’s segment profit and the reconciliation to consolidated net income during the respective periods indicated:
| | | | | | | | | | | | | | Year Ended October 31, | | 2018 | | 2017 | | 2016 | Segment profit: | | | | | | Networking Platforms | $ | 581,113 |
| | $ | 578,039 |
| | $ | 544,744 |
| Software and Software-Related Services | 69,808 |
| | 32,536 |
| | 7,123 |
| Global Services | 172,205 |
| | 159,882 |
| | 157,915 |
| Total segment profit | 823,126 |
| | 770,457 |
| | 709,782 |
| Less: non-performance operating expenses | | | | | | Selling and marketing | 394,060 |
| | 356,169 |
| | 349,731 |
| General and administrative | 160,133 |
| | 142,604 |
| | 132,828 |
| Amortization of intangible assets | 15,737 |
| | 33,029 |
| | 61,508 |
| Acquisition and integration costs | 5,111 |
| | — |
| | 4,613 |
| Significant asset impairments and restructuring costs | 18,139 |
| | 23,933 |
| | 4,933 |
| Add: other non-performance financial items | | | | | | Interest and other income (loss), net | (12,029 | ) | | 913 |
| | (12,569 | ) | Interest expense | (55,249 | ) | | (55,852 | ) | | (56,656 | ) | Loss on extinguishment and modification of debt | (13,887 | ) | | (3,657 | ) | | (226 | ) | Less: Provision (benefit) for income taxes | 493,471 |
| | (1,105,827 | ) | | 14,134 |
| Total net income (loss) | $ | (344,690 | ) | | $ | 1,261,953 |
| | $ | 72,584 |
|
Entity Wide Reporting Ciena’s operating segments each engage in business across four geographic regions: North America; Europe, Middle East and Africa (“EMEA”); Asia-Pacific (“APAC”); and Caribbean and Latin America (“CALA”). North America includes only activities in the United States and Canada. The following table reflects Ciena’s geographic distribution of revenue principally based on the relevant location for Ciena’s delivery of products and performance of services. For the periods below, Ciena’s geographic distribution of revenue was as follows (in thousands):
| | | | | | | | | | | | | | Year Ended October 31, | | 2018 | | 2017 | | 2016 | North America | $ | 1,886,450 |
| | $ | 1,736,047 |
| | $ | 1,689,263 |
| EMEA | 464,876 |
| | 404,099 |
| | 393,705 |
| CALA | 140,177 |
| | 164,308 |
| | 195,085 |
| APAC | 602,783 |
| | 497,233 |
| | 322,520 |
| Total | $ | 3,094,286 |
| | $ | 2,801,687 |
| | $ | 2,600,573 |
|
North America includes $1.77 billion, $1.63 billion and $1.58 billion of United States revenue for fiscal years ended October 31, 2018, 2017 and 2016, respectively. No other country accounted for at least 10% of total revenue for the periods presented above.
The following table reflects Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, with any country accounting for at least 10% of total equipment, building, furniture and fixtures, net, specifically identified. Equipment, building, furniture and fixtures, net, attributable to geographic regions outside of the United States and Canada are reflected as “Other International.” For the periods below, Ciena’s geographic distribution of equipment, building, furniture and fixtures, net, was as follows (in thousands): | | | | | | | | | | October 31, | | 2018 | | 2017 | Canada | $ | 198,028 |
| | $ | 203,491 |
| United States | 75,479 |
| | 90,482 |
| Other International | 18,560 |
| | 14,492 |
| Total | $ | 292,067 |
| | $ | 308,465 |
|
While we have benefited from the diversification of our business and customer base, our ten largest customers contributed 56.5% of fiscal 2018 revenue, 55.6% of fiscal 2017 revenue and 51.1% of fiscal 2016 revenue.
For the periods below, customers accounting for at least 10% of Ciena’s revenue were as follows (in thousands): | | | | | | | | | | | | | | October 31, | | 2018 | | 2017 | | 2016 | AT&T | $ | 374,576 |
| | $ | 448,943 |
| | $ | 479,077 |
| Verizon | 318,013 |
| | 288,048 |
| | n/a |
| Total | $ | 692,589 |
| | $ | 736,991 |
| | $ | 479,077 |
|
________________________________ | | | n/a | Denotes revenue representing less than 10% of total revenue for the period |
Both customers purchased products and services from each of Ciena’s operating segments. |