Ciena Buys Catena, Internet Photonics

LINTHICUM, Md. -- CIENA Corporation (NASDAQ: CIEN), a leading global provider of innovative network solutions, today announced the execution of a definitive agreement to acquire privately held Catena Networks, Inc. With offices in Ottawa, Ontario and Research Triangle Park, N.C., Catena is a leader in the broadband access market.“The combined companies will have a very attractive solutions portfolio,” said Bill Smith, chief technology officer at BellSouth, which has deployed Catena's broadband access systems throughout its nine-state operating area. "We remain committed to accelerating the delivery of high-value broadband services to our subscribers, and this move will give Catena the resources to continue to develop and enhance its products to support our plans.”“A key element of CIENA’s strategy is to drive future revenue and earnings by taking steps to expand our addressable market and the set of solutions we offer our customers,” said Gary Smith, CIENA’s president and CEO. “By joining forces with Catena Networks, an acknowledged broadband access leader with meaningful revenue and a significant and complementary customer base, we accelerate CIENA’s path to profitability. We also gain access to a market that is expected to benefit as service providers shift spending to target the access portions of their networks, building out DSL and fiber-based access.” Catena Networks has deployed more than 5,500 integrated broadband access solutions with Regional Bell Operating Companies (RBOCs), major Independent Operating Companies (IOCs) and Competitive Local Exchange Carriers (CLECs). “By uniting with CIENA we immediately and dramatically enhance the scope of Catena’s sales and support resources – a task that otherwise would have required significant investment over several years,” said Jim Hjartarson, president and CEO of Catena. “With CIENA, we also have the ability to retain the momentum and energy of a young, next-generation company and the opportunity to play a significant role in CIENA’s transformation to a comprehensive networking solutions provider. We expect the combination of our access solutions and our existing customer traction, with CIENA’s scale and reputation for delivering economically driven network solutions, will be a winning scenario for both companies and their customers, employees and shareholders.” The Broadband Access Market

“Catena is well positioned in the broadband access market, a space that is certain to capture a growing percentage of carriers’ capex budgets,” said Matt Davis, director of broadband access technologies at The Yankee Group. “The combination with CIENA immediately addresses the typical questions of scale or stability that any privately held vendor generates and makes Catena an even more credible threat to incumbent vendors in the access space.”According to market research by The Yankee Group, the number of broadband subscribers in the U.S. will nearly double in the next four years, growing from 33.5 million in 2004 to 61.5 million in 2008. The Yankee Group also anticipates growth will be stronger on a global basis with the number of broadband subscribers estimated to grow by more than 100%, from 142 million in 2004 to 327 million in 2008. The Yankee Group expects that overall, broadband equipment revenues in the access area will present a market opportunity in excess of $7.5 billion. “Broadband subscriber growth means new revenue opportunity for service providers and a growing market for Catena’s products,” Davis said. “Catena’s solutions are engineered to cost-effectively deliver voice, data and video services over both copper and fiber infrastructures – including Fiber-to-the-Premises and Fiber-to-the-Curb. When coupled with CIENA’s multiservice DN7 family, carriers will get a compelling offering to enable new DSL, voice-over-packet, and passive-optical-network services.” Catena Networks Product Overview

CNX-5
The CNX-5 Broadband DSL System is a card-for-card upgrade solution for Lucent SLC® Series 5 (SLC-5) Digital Loop Carriers. It provides two lines of integrated Plain Old Telephone Service (POTS) and Digital Subscriber Line (DSL) service and replaces cards that provide two lines of POTS only. The CNX-5 gives carriers a simple, cost-effective and scalable way to broadband-enable their installed base of SLC-5s, without reducing the number of available POTS lines.CN1000
The CN1000 Broadband Loop Carrier is a high-density broadband access system that delivers integrated voice, data and video services at a fraction of the cost of competing systems. The CN1000 provides POTS, DSL and Packet Voice capability on every line, enabling carriers to software-provision these services to any subscriber — remotely, without manual intervention. By integrating the functions of a Next Generation Digital Loop Carrier (NGDLC), a video-enabled Digital Subscriber Line Access Multiplexer (DSLAM), a fiber multiplexer and a packet-ready media gateway (VoIP), the CN1000 greatly simplifies the access network.CN1000FX
The CN1000FX Fiber-to-the-X solution enables carriers to drive fiber deeper into their networks and profitably deploy new broadband services such as video. The CN1000FX solution uniquely addresses Fiber-to-the-Home (FTTH), Fiber-to-the-Curb (FTTC) and copper distribution requirements simultaneously, on a single platform, helping carriers future-proof their networks by maximizing deployment flexibility. Carriers can cost-effectively address multiple deployment scenarios – including new-build and neighborhood-overlay opportunities – with the same, flexible access system. Transaction Terms and Timing

Under the terms of the acquisition agreement, Catena Networks will merge into CIENA, and all the outstanding shares of Catena common and preferred stock will be exchanged for shares of CIENA common stock. CIENA also will assume Catena’s employee stock options and warrants which will be converted into options and warrants to purchase CIENA shares. The total number of shares issuable in respect of Catena outstanding stock, options and warrants is approximately 77.5 million shares of CIENA common stock which, based on the closing price of CIENA’s stock on February 18, 2004, have an aggregate value of approximately $486.7 million. CIENA expects the transaction to qualify as a tax-free reorganization. This transaction is subject to various conditions and approval by appropriate government agencies and the stockholders of Catena. The boards of directors of both CIENA and Catena Networks each have approved the transaction. It is expected that this transaction will close by the end of CIENA’s third fiscal quarter 2004. For accounting purposes, the value of the transaction will be determined using a five-day average of CIENA’s common stock’s closing price beginning on February 17, 2004.Following completion of the transaction, Catena Networks will form CIENA’s Broadband Access group, led by Hjartarson, and based in Ottawa.

In a separate release:

CIENA Corporation (NASDAQ: CIEN), a leading global provider of innovative network solutions, today announced a definitive agreement under which CIENA will acquire privately held Internet Photonics, Inc. With offices in Shrewsbury, N.J. and Marlborough, Mass., Internet Photonics is a leading supplier of carrier-grade optical Ethernet transport and switching solutions.“At a time when carriers are keenly focused on next-generation broadband service delivery, the acquisition of Internet Photonics expands CIENA’s solution portfolio targeting multiservice operators and traditional carriers with the addition of a flexible platform for carrier-grade Gigabit Ethernet solutions,” said Gary Smith, CIENA’s president and CEO. “In the cable market, optical Ethernet is the underlying infrastructure for the new ‘triple-play’ of bundled services, as well as video-on-demand, voice-over-IP and HDTV. It also improves the access speeds of existing services like cable modem Internet access,” Smith said. “This same carrier-class Ethernet switching and transport infrastructure also can help traditional telecom carriers provide new high-speed Ethernet services faster and at lower cost.” “When combined with CIENA’s global reach, financial strength and current solution set, Internet Photonics’ leading broadband solutions become even more compelling and comprehensive,” said Gregory Koss, president and CEO of Internet Photonics. “In addition to the current product and customer synergies, we also see the potential to apply Internet Photonics’ flexible, low-cost transport infrastructure to enhance CIENA’s current metropolitan and enterprise solutions.”Internet Photonics’ customers include six of the top ten cable operators in the U.S., including significant deployments by Cablevision and Adelphia, as well as carriers such as TDS Metrocom, who use Internet Photonics’ solutions to deploy Ethernet private-line services. The Optical Ethernet Market

Industry analyst Infonetics Research estimates the worldwide Ethernet services market in which Internet Photonics participates will grow from approximately $2.9 billion in 2003 to $7.5 billion by 2007.“Internet Photonics' approach gives low capital and operational costs to carriers and cable operators, as well as a rapid return on investment even on minimal service take rates," said Michael Howard, principal analyst at Infonetics Research. “As a result, Internet Photonics has several major operators as customers. Internet Photonics' initial success in the growing cable transport market gives CIENA a new and attractive customer set, and CIENA's market presence, sales channel, and global support should enhance Internet Photonics' momentum.”Internet Photonics’ Product Overview

Access
LIGHTSTACK MXA is a low-cost access device deployed at the customer premise or local CO/hub providing a managed demarcation point between the operator network and the customer and delivering Ethernet and/or SONET/SDH services. LIGHTSTACK MX is an aggregation node that resides at the customer premise, hub, head-end, or central office and provides multiplexing of up to 8 GbE onto 10GigE wavelengths in a single stackable 1.75” high unit. Aggregation
LIGHTSTACK GSLAM integrates optical transport, access service aggregation, switching, and add/drop multiplexing functionality. It connects with the MXA and MX making it an ideal means to collect, aggregate, and switch access circuits. The platform’s ability to crossconnect 64 Gigabit Ethernet connections provides port scalability and bandwidth capacity needed to support major cable headends or carrier COs.Transport
LIGHTHANDLER is a 40 wavelength passive optical add/drop and bi-directional optical amplifier that interfaces into existing SONET/SDH and DWDM networks to flexibly scale services capacity. Management
LIGHTSTACK NCS offers a carrier-grade network configuration and service monitoring NMS. Its ability to simplify the tasks of network service provisioning, fault isolation, and performance monitoring makes it a powerful tool for enabling cable operators and carriers to profitably offer new Ethernet based services.Transaction Terms and Timing

Under the terms of the acquisition agreement, Internet Photonics will merge into CIENA, and all the outstanding shares of Internet Photonics common and preferred stock, and employee stock options will be exchanged for shares of CIENA common stock. Based on the average closing price of CIENA common stock for the ten trading days prior to the signing of the merger agreement, the number of CIENA shares to be issued is 24.4 million, and the value of the transaction is approximately $150 million. Internet Photonics’ employee stock options will be converted into options to purchase CIENA shares. CIENA expects the transaction to qualify as a tax-free reorganization. This transaction is subject to various conditions and approval by appropriate government agencies. The boards of directors of both CIENA and Internet Photonics, and a majority of the Internet Photonics’ shareholders have approved the transaction. It is expected that this transaction will close by the end of CIENA’s third fiscal quarter 2004. For accounting purposes, the value of the transaction will be determined using a five-day average of CIENA’s common stock’s closing price beginning on February 17, 2004. Following completion of the transaction, Internet Photonics will become part of CIENA’s Metro and Enterprise Solutions group and will continue to operate from its Shrewsbury, N.J. and Marlborough, Mass. locations.

Ciena Corp.Internet Photonics Inc.Catena Networks Inc.