CIENA CORP

Margins on Pluggables Product Suite

• Current Margin Status

  • Pluggables Margins Below Average
    • Currently, the margins on pluggables are below Ciena Corp’s average margins.
    • Specific lower margins attributed to WaveLogic 5 Nano plugs.

• Volume and Product Development

  • WaveLogic 5 Nano Plugs
    • Over 43,000 units shipped to date.
    • Serving as a foundation for increased pluggable volumes.
  • WaveLogic 6 Nano Plugs
    • Introduction of WaveLogic 6 Nano and 800-gig ZR plugs.
    • Expected to enhance performance and efficiency.
    • Anticipated ramp-up to full production will contribute to margin improvement.

• Future Outlook and Margin Improvement

  • Increased Volumes
    • Pluggable volumes expected to potentially double next year.
    • Higher sales volumes will contribute to scale benefits.
  • Product Advancement
    • Transition to WaveLogic 6 Nano plugs projected to deliver better margins.
    • Introduction of 800-gig ZR plugs expected to further enhance margin profiles.
  • Supporting Factors
    • Broader initiatives such as cloud infrastructure build-outs and Mofen opportunities aiding overall margin expansion.
    • Enhanced supply chain visibility and optimization efforts to mitigate margin pressures.

• Strategic Considerations

  • Scale and Efficiency
    • Achieving full ramp on new plug technologies will drive margin improvements.
    • Economies of scale from increased production volumes are expected to offset initial lower margins.
  • Market Positioning
    • Continued technology leadership and product differentiation support higher-margin opportunities in the pluggables segment.

• Summary

  • Pluggables Margins Trajectory
    • Initial lower margins are anticipated to improve with the introduction of advanced plug technologies and increased sales volumes.
    • Strategic product enhancements and scale efficiencies are key drivers for future margin expansion in the pluggables product suite.