Suzanne DuLong - Chief Communications Officer Gary Smith – President & CEO James Moylan - CFO Stephen Alexander - Chief Technology Officer

Cobb Sadler - Deutsche Bank George Notter - Jeffries & Co. Tal Liani - Merrill Lynch Tim Long - Bank of America Securities Paul Silverstein - Credit Suisse Ehud Geldblum - JP Morgan Samuel Wilson - JMP Securities Jeff Kvall – Lehman Brothers Mark Sue - RBC Capital Markets Simon Leopold - Morgan Keegan

Good day everyone and welcome to the Ciena Corporation third quarter 2008 results conference call. At this time for opening remarks and introductions, I would like to turn the call over to the Chief Communications Officer, Ms. Suzanne DuLong; please go ahead.

Good morning and welcome everyone. I am pleased to have with me Gary Smith, Ciena's CEO and President, and James Moylan, our CFO. In addition, Stephen Alexander, our Chief Technology Officer will be with us for the Q&A portion of today’s call. Our call this morning will be presented in four segments. Gary will provide some brief introductory comments; James will review the financial results for the third quarter; Gary will then discuss our outlook and strategy; and James will conclude our prepared remarks with guidance for Q4. We will then open the call for questions from the sell-side analysts. This morning’s press release is available on National Business Wire and First Call and also on Ciena's website at www.ciena.com. Before I turn the call over to Gary, I’ll remind you that during this call we will be making some forward-looking statements. Such statements are based on current expectations, forecasts, and assumptions of the company that include risks and uncertainties that could cause actual results to differ materially from the statements discussed today. These statements should be viewed in the context of the risk factors detailed in our 10-Q filed with the SEC on June 6, 2008. We have until September 11th to file our 10-Q for the quarter and we expect to do so by then or before. Ciena assumes no obligation to update the information discussed in this conference call, whether as a result of new information, future events or otherwise.

Thanks Suzanne and good morning everyone. With our third quarter results, we delivered solid performance including our 18th quarter of sequential revenue growth and gross and operating margins in line with our targets. In the last several years we’ve grown faster then the market by leveraging our specialist role to address our customers’ most pressing needs. However, based on our recent interactions with customers its clear that many are more carefully scrutinizing expenditures given the broader economic uncertainties. In the last weeks of the third quarter we began to experience order delays from many of our Tier 1 service provider customers. As a result we revised our near-term outlook. Still we believe the fundamental demand drivers of our business remain in tact. The proliferation of new services and applications and subsequent demand for capacity is clearly real. In fact we’re seeing strength in a number of important areas. Our international revenue is showing strong growth, the government sector continues to invest in infrastructure to support continued demand for bandwidth and new applications. And while still a small percentage of our overall business, revenue from enterprise and Tier 2 service providers continues to grow. I’ll discuss the quarter in more detail and our business outlook after James reviews the quarter’s results.

Thanks Gary and hello everyone. This morning we reported third quarter revenue of $253.2 million. This represents an increase of 5% sequentially and 24% year-over-year. We had three 10% plus customers in the quarter that combined to represent 48% of total sales. Two of the 10% customers are North American based and one is international. And two of the three were 10% customers in Q2. Sales from international customers represented 38% of total revenue in the quarter, up from 30% in Q2. Breaking our revenue by our major product groups; our converged Ethernet infrastructure group accounted for $200 million in revenue representing 79% of total revenue for the quarter. Within converged Ethernet infrastructure, core switching was the largest contributor at $79.7 million. Long-haul transport contributed $54.9 million in revenue and our CN4200 Advanced Services Platform added $41.4 million for the quarter. Our Ethernet service delivery group contributed $23.7 million representing 9% of total revenue. Product offerings from the World Wide Packets acquisition contributed $18 million of this group’s total, a substantial increase over the roughly $3 million revenue contribution in Q2. And finally our Global Network Services group which includes all of our services related offerings was $29.5 million representing 12% of total revenue in the quarter. In the remainder of my comments today I’ll speak both the GAAP results and to what the results would have been if we excluded those items detailed in the press release to develop what we call the as adjusted basis. Looking at gross margin, Q3’s GAAP gross margin was 50%. Our as adjusted gross margin was 52%, down slightly from Q2’s 54% and in line with our guidance. This number is exclusive of share based compensation, amortization of intangible assets from the World Wide Packets acquisition, and a $4.3 million adjustment to cost of goods sold resulting from a write-up to World Wide Packets inventory. This increase to cost of goods sold for revalued inventory is the result of accounting for the Packets acquisition and it was limited to our second and third quarters, therefore we do not believe it is reflective of our ongoing operations. Our GAAP product gross margin remains strong at 52% and our GAAP services gross margin increased to 34%. We are very pleased with the favorable mix within our Global Network Services group for the quarter but we continue to expect our services gross margin to normalize in a mid to high 20s range. On a GAAP basis we delivered 6% operating margin in Q3 with GAAP operating expenses totaling $110.7 million. Adjusted for the non-operating and/or non-recurring charges detailed in our press release our operating expenses totaled $94.5 million. While up a bit in absolute dollars quarter on quarter as expected, our operating expenses declined as a percentage of revenue and we delivered a 15% as adjusted operating margin. Our Q3 GAAP net income was $11.7 million or $0.12 per diluted share, adjusted for the unusual and/or non-operating items our third quarter net income would have been $39.8 million or as adjusted net income of $0.37 per diluted share. Turning now to cash flow and the balance sheet, in the third quarter we generated $33.7 million in cash from operations. Cash, short-term and long-term investments at the end of the third quarter totaled $1.1 billion. We did recognize a $5.1 million loss from our SIV-related investments in the quarter in line with our expectations as detailed in the press release we issued prior to the quarter end. Both of our SIV-related investments are in the final stages of restructuring and we do not expect any more related losses. For Q3, our accounts receivable balance was $138.1 million compared to $132.1 million in Q2. Day sales outstanding were flat with Q2 at 49 days. While the last two quarters have been better then anticipated, we still expect our DSO range to normalize between 55 and 65 days going forward. Inventory for Q3 was down 18% sequentially at $106.3 million compared to $125.4 million in Q2. Product inventory turns were 4.1x in the quarter, up from 3.1x in Q2. The inventory improvement is in part due to a number of steps we’re taking to optimize our inventory including closely managing our suppliers’ lead times and our safety stock levels. The inventory breakdown for the quarter was as follows: raw materials $20.3 million, work in progress $2.3 million, finished goods $107 million, and a reserve for excess and obsolescence of $23 million. Finally on headcount, we added 91 employees in the quarter with the majority of our new hires focused on engineering. This brings our worldwide headcount to 2,210. And now I’ll turn the call back to Gary.

The remainder of my comments will focus on three areas primarily; first I’ll touch on the market environment as it’s clearly a significant consideration right now. I’ll follow that with some thoughts on our portfolio and investments and what we’re doing to address customer needs and finally I’ll wrap up with remarks about our position in the market and our outlook. As our results to date have shown, we’ve executed very will this year including Q3. We’ve demonstrated our ability to execute on our commitment to delivering solid financial performance while raising our profile and logging successes in high growth markets. Still as we’ve said before we are not immune to macro conditions and overall industry ebbs and flows specifically as I noted in my introductory comments, we believe we have begun to see the effects of broader economic uncertainties primarily among our Tier 1 service provider customers. On the positive side, we’re not losing business nor are projects being cancelled but orders are getting pushed out which means deployments are generally slowing down. As a result our expectations and near-term demand changed significantly in the last several weeks of Q3. And the pattern has persisted into the start of Q4. As I noted previously, the trend is consistent across our Tier 1 customers. It is also consistent across our entire product portfolio. This macro driven slowdown comes on top of some existing and well publicized customer specific challenges that prior to Q4 we had navigated successfully. It’s possible that absent one or the other of these dynamics we’d be having a different conversation today, but the combination of the two results in our revised outlook. For several reasons however, we believe that this will be short-lived albeit multi quarter slowdown. First, our service provider customers are much healthier then they were several years ago and end user demand remains strong. The predicament service providers’ face now is adjusting their business models to reflect the changing nature of that demand and better leveraging their networks as revenue generating assets. We believe services providers’ ability to postpone capital expenditures is limited for a number of reasons tied to their hard earned financial health. They need to meet customer demand which means they need to offer [a monetized] new services to drive revenue growth and they need to do so while continuing to reduce their operating costs by moving to more efficient network infrastructures. Secondly we believe the industry is still only in the early stages of a significant technology shift which we are well positioned to address; that is the transition from Sonet/SDH to Ethernet based networks is undeniable and has touched only a fraction of the market so far. Thirdly of all the available data including the pace of the adoption of more efficient network architectures globally, increasing demand for bandwidth and new services and conversations with our customers, all indicate that the industries experience a short-lived slowdown versus a prolonged downturn. So while we cannot deny the uncertainty in the short-term, we have a sound architectural vision that is echoed and endorsed by our customers, and we remain confident in our long-term opportunities. We are mindful of the need to preserve profitability without sacrificing our long-term opportunity. As a result we will look to maintain our momentum in the short-term by prioritizing R&D and sales related spend ahead of all other operating expenses. If we get indications that the slowdown is either deeper or more prolonged then we currently expect we will take action to reduce our operating expenses. However we won’t look to change course at this point. To that end we will continue to invest in enhancing our portfolio in ways that address our customers’ most critical challenges, principally the migration to converged architectures; with an expanding solutions and software orientated approach to service delivery we are well positioned to do that. We are deliberate in leveraging our heritage and positions of strength. We made the transport network more flexible, automated and resilient. We then laid in the beneficial economics of Ethernet. Now we’re adding the tools to improve service enablement, velocity and monetization with increased software. To affectively facilitate that we remain focused on prioritizing around several areas including building data optimized switching solutions, expanding our Ethernet service delivery and aggregation platforms, and filling out our converged transport and aggregation family, and as I said before extending the value of software across the portfolio. We’ve already begun to see positive impact from this portfolio direction. In fact in the third quarter we took our first CN4200 orders for an international IPTV project and we also won for the World Wide Packets platforms a WiMax build as well with a large North American MSO. Additionally we’re growing our business in the Tier 2 service provider and enterprise markets as well as expanding our managed services partnerships across all segments. In summary we acknowledge that based on what we’ve seen recently and what we’ve heard from our piers and competitors we’re in a volatile environment where things can change quickly. However we remain confident that our vision and strategy positions us well to help customers navigate a changing market landscape and compete more effectively. For the long-term we are committed to development and investments focused around optimizing our portfolio to deliver software enabled service driven networks. We’ve been able to outperform our peers and competitors for the last several years because we’ve been executing well on a strategy that is aligned with the evolving business needs of our customers. We’ve worked hard to stabilize our business model and we are committed to running a profitable business. I’ll turn the call back to James at this point to talk about our specific guidance for Q4.

Thank you Gary, I’ll conclude our prepared remarks today by talking to guidance for Q4. I’ll remind everyone that the statements we’ve just made and those that I am about to make are forward-looking and it’s important to understand them in the context of the risk factors detailed in our 10-Q. As we said in our press release we now expect fiscal fourth quarter revenue of between $190 million and $210 million. As Gary noted the macro uncertainty seems to be pervasive across our portfolio. As a result our expectations around fiscal 2008 revenue from World Wide Packets have also changed. We now expect the former Packets business will contribute between $25 million and $35 million in total for fiscal 2008. On gross margin as we’ve said previously gross margin remains difficult for us to predict with accuracy and we expect it will continue to fluctuate from quarter to quarter. Our gross margin ultimately depends on a combination of factors, including product and customer mix. Based on our visibility [and to] expected order flow and product mix, we believe our Q4 gross margin will be within a mid to high 40s range. Given current market conditions, we now expect operating expenses to remain flattish in absolute dollars from Q3. We expect other income and expense net in the fourth quarter will be income of approximately $4 million. Just to touch briefly on our tax position, though it ultimately depends upon the level of GAAP profitability we achieve going forward, we believe it is possible that we will be required to release a portion of our deferred tax valuation allowance in Q4. We’ll talk about this in more detail when we get to Q4 and have greater clarity on our GAAP profitability in the quarter and expected profitability for future periods. In the meantime remember that while our GAAP tax rate may change, it will be as many as 10 to 15 years before we’ll have to pay any meaningful US cash taxes and our as adjusted results will continue to reflect that. Finally we estimate Q4’s diluted share count at approximately 112 million total shares. We will now take questions from the sell-side analysts.

(Operator Instructions) Your first question comes from the line of Cobb Sadler - Deutsche Bank Cobb Sadler - Deutsche Bank: Your commentary around stretch out and deployment cycles versus your Q4 revenue guidance, down north of 20%, quarter on quarter, if it’s just the stretch out and deployment cycle, why is the near-term quarter down so much quarter on quarter?

I think it’s a combination of things, I think its orders, its deployments, its revenue recognition, you characterize it as overall demand and looking at looking at that profile right now causes us and the push out really of some of those requirements that caused us to affect the revenue outlook so dramatically. Hence the 20% and also it was from multiple customers in Tier 1s.

The other thing I’d say is we saw this in the last few weeks of the third quarter and it has persisted as we’ve come into the fourth quarter given lead times, manufacturing times all that, that’s really the outcome is a revenue quarter in the range that we’ve talked about. Cobb Sadler - Deutsche Bank: And with World Wide Packets at AT&T, it sounds like that’s probably going to happen as is usual, a little later then the normal expected, is the opportunity any smaller then you originally thought or is it just kind of a little bit of a delay in deployment timetable?

I think the whole World Wide Packets opportunity there, Ethernet service delivery with AT&T is on track. It always takes longer then you think to get these new services into a large carrier but it is absolutely on track and in terms of size I would say its from our expectation it has not changed since we first made the acquisition and won the business with AT&T so I would absolutely characterize it as being on track. I think as we said at the last call we don’t expect any meaningful revenues from that probably until certainly 2009 and probably the second half of that by the time it rolls out and we can recognize revenue.

Your next question comes from the line of George Notter - Jeffries & Co. George Notter - Jeffries & Co.: You mentioned that this will be a multi quarter slowdown but that the business would come back over time, can you flush out for us why you expect some of these slower customers to come back, what about your conversations with them, or order book, or visibility allows you to have confidence in believing these guys will come back?

I think first of all our position in their networks; I think we describe it now as strategic, as a vendor to many of these Tier 1 carriers. I think secondly talking to them they clearly see pretty good demand dynamics from their perspective. I think we’re all seeing multiple applications driving demand on their networks, their challenges, how can they monetize it and the shift towards, next generation networks which clearly [pays] into both our position in the network, our value proposition and I think the underlying demand characteristics are strong. And I also think if we step back from it, I think we’re in the early days of a fairly fundamental shift from Sonet/SDH to Ethernet deployments and I think we’re pretty well placed there. I would characterize the executive conversations with these large carriers as being really just increased scrutiny, I don’t think any of them are really sort of changing their plans. I think they’re just being very cautious given the macroeconomic environment that they are on or below their anticipated budgets. George Notter - Jeffries & Co.: About AT&T, obviously they’ve been a very big customer for you on the Core Director, it seems like the magnitude of the change in expectations would imply that AT&T has to be a big part of this, is there, can you confirm that some of the softness is coming from AT&T?

I would say that the slowdown, if we characterize it as that, is pervasive across the Tier 1, I would also offer more color to you that it is predominantly, I stress not exclusively but predominantly in the North American arena. I would say specifically to AT&T that we’ve seen a little bit of that there, I would also add that the Core Director deployments are ongoing and we believe on track for the remainder of the year. We’ve seen ebbs and flows before and we absolutely believe that the Core Director deployments at AT&T are on track and we have some visibility into that.

Your next question comes from the line of Tal Liani - Merrill Lynch Tal Liani - Merrill Lynch: Specifically in North America you had very large deployments with two accounts for Core Director, how much of the slowdown you’re seeing in the fourth quarter is coming from end of projects or projects that have just ended, and how much of it is coming from the slowdown in the traditional long-haul point to point etc.? I want to make the distinction between one of projects and ongoing deployment of capacity. Second expenses, in the last cycle it took the company a long time to get back to profitability, many many years, what are your plans this round if this slowdown continues a year, two years, what are your expectations when it comes to expenses? How flexible are you R&D and sales and marketing expenses and other types of expenses?

I would be at pains to describe it as non-project related. I don’t think that any of the things that we’re really seeing are related to end of project, I would really just relate it to the carriers providing additional scrutiny to the CapEx dollars that they’re spending and I think it’s just resulted in an elongation of their deployments. No fundamental changes to them. We’re not seeing any orders cancelled. We’re in fact seeing activity across the portfolio continue. We’re not losing deals. So I’d be at pains, I’m very careful to characterize exactly what we’re seeing and I think it really would summarize it as just additional scrutiny on CapEx; no changes to the plans and that makes sense when you look at the demand characteristics that are driving the carriers. So I think their challenges are really just being mindful about what could happen from macroeconomic point of view. Tal Liani - Merrill Lynch: Is it that the same [peak] projects of Core Director are not getting full on orders nor do you see the weakness in capacity related equipment, not--?

I was going on to say we’ve seen it across all of the product lines. So I don’t think I can provide real distinction to you. We’ve seen it across all of the platforms. That’s why we’d really characterize it as more of a macroeconomic issue then specifically related to long-haul transport, or [Metro] or even Ethernet or converged architectures around Core Director, its really across all of the platforms. Tal Liani - Merrill Lynch: The profit question?

Firstly I’d say, I think we’re in a very different environment then we were in 2001, 2002. I think first of all Ciena is in a position of strength. I think it’s a more mature and balanced business now notwithstanding, we’re not immune from the macroeconomics and particularly you can say we do have customer concentration amongst the major Tier 1s and particularly in North America. So we are vulnerable to that. I don’t think there’s any question, as we’re witnessing in our Q4. But I would say I think it’s a very different environment and we’re a much stronger business then we were in 2001; we’re broader based, we were really a single platform company in 2001. I would also say that we’ve managed to run a profitable business over the last couple of years and we intend to continue to run a profitable business. I would characterize what we think the environment is right now as being fairly short-term. We will continue to monitor the environment around that, manage our expenses prudently and I think as James outlined in his guidance, we’re going to be flattish from Q3 to Q4. We want to maintain our strategic [advancements]. If the environment deteriorates and appears to be longer term and difficult we’re not afraid to make some difficult decisions. I would also say that the investments that we made during the downturn really put us in a good position to outgrow the market then the last few years but clearly it’s a balance. And it’s a balance that we’re not afraid to make. Tal Liani - Merrill Lynch: You had two types of growth, two types of deployments over the last few years. One is a change of architecture, to Ethernet or to [mesh] networks and another one was capacity, simply capacity because internet traffic is going up, can you say that you see the slowdown in one group versus another which means if you see slowdown also in capacity it means we have some excess capacity in the network and can you measure how much excess capacity we have?

I do not think that capacity is overbuilt. As I said earlier I think the ability of customers, even if you just trade just capacity, I don’t think the carriers have a tremendous ability to delay expenditure because they don’t have a lot of excess capacity. I think carriers can always run their networks a little hotter which is probably what they’re trying to do right now is they’re looking to manage their CapEx very carefully but they’ve got real demand on that capacity so I don’t think that we’re seeing them having overbuilt capacity and now we’re in for a lull. I don’t think that’s what’s driving it. Tal Liani - Merrill Lynch: It’s more about discretionary spending of carriers trying to deploy new architectures and they can postpone it for awhile if they don’t have the money to spend right now.

I think that’s reasonable and I think even on the capacity stuff they’re just being really careful with it and so they can stretch that out a couple of quarters. So I think you combine those two but what’s really driving them is just the uncertainty in the global macro economy and they’re just scrutinizing all of the dollars more carefully. I don’t think they’re changing their plans. They know they need to drive to new architectures because that will reduce their costs and allow them to create new services and also they need to add capacity if they’re going to provide these new services and bring new customers on. So those are the challenges that they’ve got.

And its not that they don’t have the money, they’re in great financial shape. They’re generating cash, they’ve got strong balance sheets, stronger then they’ve been in a long time so they have the money. The demand seems to be growing. They’re now just watching the economic environment and they’re going to make decisions over time as befits their capacity growth.

Your next question comes from the line of Tim Long - Bank of America Securities Tim Long - Bank of America Securities: On the gross margin guidance for next quarter is this all mix or are we finally seeing more of a volume impact? We haven’t really seen a volume impact the last few quarters and if so, what are the mixes causing it? If you could detail some of your outlook for Europe and the international markets, its been pretty strong and you said you’ve seen it a little bit more in the US, are you seeing any early indications that we might be seeing one or two quarters from now in Europe what we’re seeing here in the US right now?

On the gross margin, it is not the effect of volume it is purely the effect of mix. We’ve said many times in the past that mix across both products and services is quite varied among our products or our offerings and as well as between customers. So this is purely a mix affect. It has nothing to do with volume. Tim Long - Bank of America Securities: Can you highlight within it what is causing; we’re talking about a 500, 600 basis point decline?

I think we’ve been able to post gross margins above 50% for I think the last three quarters, four quarters, last year we had a gross margin I think in Q2 where it went down to 42%. We don’t think it’s going to go down that low but I think we’ve always been most consistent around really our sustainable gross margin is in the sort of mid to late 40s, on a normalized kind of mix. So even within the product lines themselves, it depends on the mix, how much software, what application was sold into. Looking at our business, while its great to be in the 50s and we can certainly touch that, and that’s certainly our ambition as we continue to rollout more software orientated platforms, I think right now which is why we keep coming back to the mid to late 40s range on the margin is just because of the product mix. If we’re successful in executing on our overall strategy as we get to late 2009, 2010 we hope to be in a position to have sustainable gross margins that begin with a five. With regard to the sort of potential hangover affect into international of what we’re seeing, we did see among some of the Tier 1 even internationally, I’d predominantly characterize it as North American thing that we’re seeing but that also we are heavily skewed towards North America from a concentration point of view. We actually saw our international markets grow, 38% of our revenues in Q3. We are seeing one or two of the Tier 1 have the same kind of phenomenon and we’re seeing that fairly broadly across some of the Tier 1s internationally. We’re not as exposed from a revenue point of view to them as some of the North American ones, but we are seeing it there.

Your next question comes from the line of Paul Silverstein - Credit Suisse Paul Silverstein - Credit Suisse: In terms of visibility when you look out to 4Q and beyond, how much of your comments and thoughts regarding the outlook is based upon direct conversations with customers and I think historically you’ve cited about two quarters worth of visibility on a rolling basis. I assume that’s changed given the guidance you just put out and your comments about the CapEx environment, but how much of your insight beyond the quarter is more based in concrete or data points and how much of it is just this kind of big macro picture in terms of the secular trends etc.?

I think it’s a combination of all of those things. I think to answer your question, yes; I think our visibility is certainly diminished given what we’re seeing in late July and August. So I think it’s a combination of those things. Clearly its orders, the overall pipeline closure rate. Typically what you see in this kind of environment, you’re not losing orders, your pipeline is actually getting bigger but you can’t get orders in and they continue to slip as CapEx is being scrutinized. Dialogue with our customers is certainly critical during this kind of period and so a large part of the weighting to your direct question is around those kinds of conversations because from a data driven point of view, it would actually be easier to, you could conclude that your pipeline is actually in real terms going up and so you feel very good about the future, but you’re not able to keep, to closing those orders in a rate you would have anticipated. So I think exactly to your point, the conversations become more important particularly at the executive and operational level as to what’s really going on. And I think the dialogue that we’ve had I’d characterize as people are just being careful with the CapEx, no changes to the projects. They see the need to put capacity on. They want to move their networks more to Ethernet. They want to create new services, they’re just being way more cautious with it. Paul Silverstein - Credit Suisse: In terms of activity measured by RPs, bids, wins, etc. both on the Core Director side 4200, and long-haul, can you give some insight in terms of what you’re seeing out there beyond your current customer base, are you seeing increased activity or are you seeing stable activity etc.?

I would say we’re actually seeing increased activity and we’re seeing that, our government business is going up, our enterprise and Tier 2 business is going up, our international business is going up, and if you look at it, on a product basis, some of the newer products that we’ve brought in, with the World Wide Packets platform we won a WiMax back haul application, we won a new MSO in North America, so I think the opportunities are out there and in fact on some of the newer Ethernet based convergent stuff, its growing. Paul Silverstein - Credit Suisse: Have there been optical switch opportunities?

Yes, we’re seeing that as well. We continue to see opportunities for Core Director. They’re just not closing as quickly. We’re just not getting the orders and bringing them to closure and getting the deployments as fast.

Your next question comes from the line of Ehud Geldblum - JP Morgan Ehud Geldblum - JP Morgan: On the new guidance you’re giving for World Wide Packets, you’d often said the AT&T deals were not going to actually hit until the end of 2009, and so this seems like, has nothing to do with that AT&T deal, the new lower guidance and I would assume that their regular course of business seems to be either slowing, have they lost deals there or why is that lower for FY08 for the near-term quarter? When you do the math on what you were talking about with respect to revenue and gross margins and relatively flat OpEx you’ll end up with barely breakeven operating margin for next quarter, I know you said that you’re monitoring how deep this slowdown is and whether to cut back further, but is operating margin something you look at and how low would you let it go? Would you go to negative three, negative five percent before you cut back on the OpEx or how do you look at that? And then when you look at your Tier 1s that appear to be slowing, does it appear that they are just slowing their spending in areas that Ciena plays into or are you seeing they’re slowing their spending across the board in every last bit of, Sprint notwithstanding, but in the other Tier 1s, are you seeing that they’re cutting spending or at least pushing it out, soup to nuts in every type of category or is somehow being singled out in the areas that Ciena sells into?

From a carrier spending profile as best we can tell, we play in a number of areas so I think it’s fairly broadly based. I don’t think it’s singled out just for the areas that we play in even if you characterize it as being transport or switching or convergence or next gen. I think they’re just being very careful across the board and in dialogue that I’m having with peers and with our customers, that seems to be the case though I’d also caution we’re fairly early into getting out arms around this. But what I would say is I don’t think it’s us specific, I think it’s broader. In terms of the World Wide Packets piece they had, I think a good Q3 at about $18 million of revenue ramping up from $3 million the previous quarter clearly that will be down we think in Q4. I just really characterize that more as just the early stages of ramping issues, of us integrating it, getting it out to the sales force and early stages of adoption. Some of the order flow that we’re seeing, we won a new MSO in North America, a WiMax deployment in North America, so we’re very encouraged by what we’re seeing but also I think people are being cautious around their spend there too. So I think that is having some impact on Packets.

And they’ve not lost any business or customers in their major accounts. They have not, their customers have not deployed as quickly they, Packets, had expected. Ehud Geldblum - JP Morgan: Is it wrong to assume that they’re mainly more in Tier 2 and Tier 3 aside from this AT&T deal? So would this be an indication that Tier 2 and 3 might be slower as well?

They’ve actually got some exposure to some of the Tier 1s.

On the operating margin question, you’ve done your math appropriately. Operating margin is a metric that we look at obviously. Our target as we move through time is going to be 15% or greater, however as we’ve said, we believe that this is a relatively short-term, probably multi quarter but relatively short-term slowdown and with our confidence in that, we don’t think its time for us to reduce our investment particularly in our R&D projects. If we are in a short-term downturn, those, any reduction in our R&D spend is going to have a revenue impact as we come out and so we don’t want to slow down our investments at this point in time. That is going to effect operating margin over the next few quarters. However, if as we move through the next period of time, we believe that this is going to be longer lived then what we now believe it to be, then we will take the appropriate action. We’re not going to do it right now.

Your next question comes from the line of Samuel Wilson - JMP Securities Samuel Wilson - JMP Securities: What would you expect headcount additions to be or hiring plans to be for this quarter and next quarter and what was CapEx for the last quarter?

There will be some addition to headcount from here but it won’t be significant. So we’re still filling out some of the engineering positions that we had planned but there won’t be a major increase over the fourth quarter. As far as CapEx, we spent $8.6 million in the quarter, most of that had to do with test equipment in our R&D labs. Samuel Wilson - JMP Securities: What was the adjusted share count used in the quarter?

It was 111.7 million.

Your next question comes from the line of Jeff Kvall – Lehman Brothers Jeff Kvall – Lehman Brothers: Do you have a sense of what triggers, how do you decide when a short-term slowdown may turn into a longer term one?

There’s no simple answer to that. We’ve got our antennas clearly well and truly up and in dialogues with our major customers etc. and you’re gathering more information all the time. You don’t want to overreact if its short-term, you don’t want to under react if it proves out to be a longer term phenomenon. I do think looking at the dynamics of the industry and the demand characteristics I do think that this would lead you to then conclude this is going to be relatively short term. We’re well placed as a company. We’ve outgrown the market for the last few years. We’ve invested. We’ve got refreshed platforms coming out all the time. So it s really hard to get your head around this being a long-term deep industry-wide downturn, it really is, given the very positive dynamics from an application point of view and an overall traffic characteristics but we’ll continue to be vigilant on it.

All the data we see says that the flow of data across the networks continues to increase and our customers are shifting towards Ethernet type services and all of that says that this is short-term but we’re going to be watching it. Jeff Kvall – Lehman Brothers: Have you started to discuss 2009 CapEx plans with carriers yet or is it still too early for that?

Its certainly one of the next big data points. I think we’ve started to have some initial dialogue with them but I think it’s too early to tell. We’re just in early September but we’re not seeing any diminishment of opportunity. We’re seeing new RFPs for the kind of platforms that we’re bringing to market. Jeff Kvall – Lehman Brothers: Inventory, do you have a sense of if there’s any excess inventory in the channel at any of your carrier partners or is that not really part of the equation?

I don’t think that’s part of the equation, I think one of the healthy things that’s happened to the industry I think since some of our lessons from 2001, 2202 is they tend to be success based. So most of our carrier customers are really, take equipment from us on a success based, its very hand to mouth.

Your next question comes from the line of Mark Sue - RBC Capital Markets Mark Sue - RBC Capital Markets: Any indications from customers that they will not increase their utilization rates on their networks and prolong things even longer and also in the prior downturn, did people go out of their way to cancel projects or did they just not act on them?

I think it’s obviously, and we all go to having experienced what we’ve experienced in the previous downturn, but I would say it’s a very different environment right now. What we saw last time around was cancellations, absolutely, people had overbuilt their networks, they had over capacity, and the real demand wasn’t there. We’re not seeing anything like that. All we’re seeing is just increased scrutiny of CapEx dollars and an elongation of them letting those out on the actual projects. We’re seeing nothing cancelled. We’re not losing deals. I wouldn’t characterize it in any other way. To your question on utilization, you can always increase utilization on some of these networks and they will probably run them slightly hotter. But they can’t do that for very long because there are real capacity demands coming on. All of the mobile traffic is only really just starting in terms of video access and the internet access over mobile. All of that traffic growth is coming onto the network so I think the ability of carriers to delay that is extremely limited. I really think for all of those reasons it’s a very different environment. Mark Sue - RBC Capital Markets: How should we think of the slope of the recovery after two quarters of weakness, is it a gradual or can we actually see things normalize pretty quickly after two quarters?

The only answer to that is we honestly don’t know. We try and call and give guidance based on our best view of things and clearly our visibility is very limited compared to what it was. So I really think I couldn’t predict the slope of that curve. I can talk about the industry dynamics which I think are positive. I can talk about Ciena’s position within the customers, which I think has never been better. I can look at our portfolio and the investments we’ve been able to make over the last few years and I’ve never felt better about the portfolio in terms of its positioning. But given what we’re seeing right now I just think it would be inappropriate of me to try and predict that slope to be absolutely frank.

Your final question comes from the line of Simon Leopold - Morgan Keegan Simon Leopold - Morgan Keegan: Typically your January quarter seasonality suggests that that could be a sequential down quarter but we’re coming off of an unusual comparison so what’s your best thought on seasonality and what kind of pattern you expect in the January quarter?

Occasionally we’ll see some seasonality. Clearly the past couple of years we’ve seen poor orders in August and July. I’m very careful not to characterize what we’re seeing as just seasonality right now. I think it’s more then that. In terms of looking forward I guess you’re talking about Q1, which is Christmas, Thanksgiving and New Year, it’s typically not a great quarter given all of those other activities and people are just starting their new year budgets. But again I’d go back to we really don’t have good visibility into that. Simon Leopold - Morgan Keegan: In terms of after we get through that period and we think about a recovery, how much of a recovery in business is dependant on in your view new products that are under development beyond the World Wide Packets platforms?

I think the portfolio that we’ve got out there right now and we’re adding platforms and enhancements all the time, I don’t think there’s a particular catalyst to recovery of a new platform. We have new things happening particularly in the second half of 2009, some big platforms coming through but again from a revenue point of view, its probably end of 2009, 2010 before they start to kick in. Simon Leopold - Morgan Keegan: The stock started weakening up early in July significantly as if somebody investing in the stock recognized the problems before the rest of us and you’re early comments at the opening suggested you saw the slowdowns just in the last few weeks, what do you think was going on in terms of your investors and the thought process and stock reaction relative to the way things actually transpired in your business day to day during the end of the quarter?

I can only answer that from a sort of personal perspective; I think that some of our peers and competitors results indicated a volatile environment. I think that was across the board. I think the macroeconomic concerns began to gain traction and while people felt that Telecom was a good place to be at that time, I think just the increase in those concerns and some of our peers and competitors results and guidance, some of them changed fairly dramatically during the mid year and I think that weighed on everybody’s thinking. From our perspective we had a couple of particular challenges around a couple of large Tier 1s that I think were well discussed that were really nothing to do with the macroeconomic stuff but I think those challenges if you overlay that, the increased scrutiny of CapEx we began to see in July and carried through into August which really impacted our guidance today. It’s also what we saw in August. So it’s a combination of those factors from our point of view. In terms of where the stock went where it did, I couldn’t say more then that.

There are no further questions; I would like to turn it back to Gary Smith for any closing or additional comments.

Thanks to everyone for your time this morning. We look forward to seeing many of you at the Deutsche Bank Conference in San Francisco next week and also on October 7th at our Analyst Day New York. Details about this event will be forth coming in the following weeks. Thank you.