| SEGMENTS AND ENTITY WIDE DISCLOSURES |
SEGMENTS AND ENTITY WIDE DISCLOSURES Segment Reporting Ciena’s internal organizational structure and the management of its business are grouped into the following operating segments:
| | • | Networking Platforms reflects sales of Ciena’s Converged Packet Optical, Packet Networking and Optical Transport product lines. |
| | ◦ | Converged Packet Optical — includes the 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, which feature Ciena's WaveLogic coherent optical processors. Products also include the 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. |
| | ◦ | 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 and the Ethernet packet configuration for the 5410 Service Aggregation Switch. |
| | ◦ | Optical Transport — includes the 4200 Advanced Services Platform, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL) and 6100 Multiservice Optical Platform. Ciena's Optical Transport products have either been previously discontinued, or are expected to be discontinued during fiscal 2017, reflecting network operators' transition toward next-generation converged network architectures. |
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 Condensed Consolidated Statement of Operations. | | • | Software and Software-Related Services reflects sales of Ciena’s network virtualization, management, control and orchestration software solutions and software-related services, including subscription, installation, support, and consulting services. |
| | ◦ | This segment includes Ciena’s element and network management solutions and planning tools, including the OneControl Unified Management System, ON-Center® Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release and Planet Operate. As Ciena seeks adoption of its Blue Planet software platform and transitions features, functionality and customers to this platform, Ciena expects revenue declines for its other element and network management solutions. |
| | ◦ | This segment includes Ciena’s Blue Planet network virtualization, service orchestration and network management software platform. Ciena's Blue Planet platform includes multi-domain service orchestration (MDSO), network function virtualization (NFV), management and orchestration (NFV MANO), and Ciena's manage, control and plan (MCP) solution, SDN Multilayer Controller and V-WAN application. |
Revenue from the software platforms portion of this segment is included in product revenue on the Condensed Consolidated Statement of Operations. Revenue from software-related services is included in services revenue on the Condensed Consolidated Statement 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 Condensed 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 April 30, 2017, equipment, building, furniture and fixtures, net totaled $299.8 million primarily supporting asset groups within Ciena's Networking Platforms and Software and Software-Related Services segments and supporting Ciena's unallocated selling and general and administrative activities. As of April 30, 2017, $43.1 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Networking Platforms segment and $70.1 million of Ciena's intangible assets, net were assigned to asset groups within Ciena's Software and Software-Related Services segment. As of April 30, 2017, all of the maintenance spares, net, totaling $48.4 million, were assigned to asset groups within Ciena's Global Services segment.
Segment Revenue
The table below (in thousands) sets forth Ciena’s segment revenue for the respective periods:
| | | | | | | | | | | | | | | | | | Quarter Ended April 30, | | Six Months Ended April 30, | | 2017 | | 2016 | | 2017 | | 2016 | Revenue: | | | | | | | | Networking Platforms | | | | | | | | Converged Packet Optical | $ | 502,131 |
| | $ | 435,173 |
| | $ | 914,783 |
| | $ | 824,341 |
| Packet Networking | 66,326 |
| | 68,582 |
| | 138,520 |
| | 116,779 |
| Optical Transport | 3,030 |
| | 8,451 |
| | 8,128 |
| | 20,596 |
| Total Networking Platforms | 571,487 |
| | 512,206 |
| | 1,061,431 |
| | 961,716 |
| | | | | | | | | Software and Software-Related Services | | | | | | | | Software Platforms | 13,143 |
| | 11,772 |
| | 30,192 |
| | 19,851 |
| Software-Related Services | 24,573 |
| | 18,701 |
| | 46,904 |
| | 36,048 |
| Total Software and Software-Related Services | 37,716 |
| | 30,473 |
| | 77,096 |
| | 55,899 |
| | | | | | | | | Global Services | | | | | | | | Maintenance Support and Training | 58,241 |
| | 57,069 |
| | 113,231 |
| | 113,127 |
| Installation and Deployment | 28,695 |
| | 30,232 |
| | 56,614 |
| | 61,072 |
| Consulting and Network Design | 10,883 |
| | 10,737 |
| | 20,147 |
| | 22,018 |
| Total Global Services | 97,819 |
| | 98,038 |
| | 189,992 |
| | 196,217 |
| | | | | | | | | Consolidated revenue | $ | 707,022 |
| | $ | 640,717 |
| | $ | 1,328,519 |
| | $ | 1,213,832 |
|
Segment Profit (Loss) Segment profit (loss) is determined based on internal performance measures used by the 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; restructuring costs; interest and other income (loss), net; interest expense; and provisions for income taxes. The table below (in thousands) sets forth Ciena’s segment profit (loss) and the reconciliation to consolidated net income (loss) during the respective periods indicated: | | | | | | | | | | | | | | | | | | Quarter Ended April 30, | | Six Months Ended April 30, | | 2017 | | 2016 | | 2017 | | 2016 | Segment profit (loss): | | | | | | | | Networking Platforms | $ | 150,464 |
| | $ | 132,606 |
| | $ | 264,210 |
| | $ | 239,588 |
| Software and Software-Related Services | 4,551 |
| | 192 |
| | 12,252 |
| | (3,382 | ) | Global Services | 41,602 |
| | 35,692 |
| | 77,071 |
| | 75,688 |
| Total segment profit | 196,617 |
| | 168,490 |
| | 353,533 |
| | 311,894 |
| Less: Non-performance operating expenses | | | | | | | | Selling and marketing | 88,551 |
| | 86,668 |
| | 173,553 |
| | 169,146 |
| General and administrative | 34,990 |
| | 35,203 |
| | 70,854 |
| | 66,345 |
| Amortization of intangible assets | 10,980 |
| | 15,566 |
| | 25,531 |
| | 32,428 |
| Acquisition and integration costs | — |
| | 2,285 |
| | — |
| | 3,584 |
| Restructuring costs | 4,276 |
| | 535 |
| | 6,671 |
| | 919 |
| Add: Other non-performance financial items | | | | | | | | Interest expense and other income (loss), net | (16,226 | ) | | (11,641 | ) | | (31,059 | ) | | (33,127 | ) | Less: Provision for income taxes | 3,568 |
| | 2,595 |
| | 3,978 |
| | 3,894 |
| Consolidated net income | $ | 38,026 |
| | $ | 13,997 |
| | $ | 41,887 |
| | $ | 2,451 |
|
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): | | | | | | | | | | | | | | | | | | Quarter Ended April 30, | | Six Months Ended April 30, | | 2017 | | 2016 | | 2017 | | 2016 | North America | $ | 424,373 |
| | $ | 395,505 |
| | $ | 830,301 |
| | $ | 788,209 |
| EMEA | 105,776 |
| | 96,175 |
| | 197,319 |
| | 176,897 |
| CALA | 33,971 |
| | 57,896 |
| | 69,117 |
| | 101,706 |
| APAC | 142,902 |
| | 91,141 |
| | 231,782 |
| | 147,020 |
| Total | $ | 707,022 |
| | $ | 640,717 |
| | $ | 1,328,519 |
| | $ | 1,213,832 |
|
North America includes $392.0 million and $367.1 million of United States revenue for fiscal quarters ended April 30, 2017 and 2016, respectively. For the six months ended April 30, 2017 and 2016, United States revenue was $771.7 million and $732.3 million, respectively. No other country accounted for 10% or more 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 was as follows (in thousands): | | | | | | | | | | April 30,
2017 | | October 31,
2016 | United States | $ | 99,694 |
| | $ | 103,018 |
| Canada | 188,804 |
| | 173,885 |
| Other International | 11,294 |
| | 11,503 |
| Total | $ | 299,792 |
| | $ | 288,406 |
|
For the periods below, one customer accounted for at least 10% of Ciena’s revenue, as follows (in thousands): | | | | | | | | | | | | | | | | | | Quarter Ended April 30, | | Six Months Ended April 30, | | 2017 | | 2016 | | 2017 | | 2016 | AT&T | $ | 107,532 |
| | $ | 116,014 |
| | $ | 203,969 |
| | $ | 242,614 |
|
AT&T purchased products and services from each of Ciena's operating segments. |