Hello Team.

As a reminder, here are the questions for our case study CIENA Corporation.

1a) How has Ciena's strategy evolved?

1b) Why?

2) What is the strategic situation facing Ciena in 2002?

3)What are Ciena's strategic options in 2002?

4) What would you recommend they do?

Go Team!
Eunice :)
posted by Eunice Wong at 11:15 PM

5 Comments:

Here are my answers.. for now :)

1) Phase I (1996 - 1998) - faced an aggressive set of buyers who focused on the best technolgy, CIENA bet

on the emerging DWDM technology to dramatically transform the economics of telecom networks built by

service provider.

Phase II (1998-2000) - competitors caught up and the margins on its long-haul DWDM transport product

dropped, the company used its execution and acquisition capabilities to re-create a lead in the switching

market. This execution enabled CIENA to remain competitive in the switching market. The strategy of this

phase was "External acquisition of technologies and spotless execution to deliver new products".

Phase III (2000-2002) - carriers were straining under heavy debt and had shifted their focus from building

new networks to maintaining and optimizing their existing ones. Therefore, the carriers then became

focused on solutions that helped reduce the costs of operating their networks. The stretagy then was to

focused on hiring experienced executives with deep relationships among carriers, to shorten sales cycles and

atract new customers.

2)

- In 2002, the total telecome spending fell to an estimated $53 billion from $92 billion in 2000. This changed

the entire business line for CIENA caused by the revenues fall with the optical equipment.
 - equipment vendors competed for customers, and existing relationships became an advantage. Because

customers were concerns with ongoing upgrades, maintenance, and support, they remained with familiar or

established vendors. CIENA's marketing and sales efforts had been more focused on the engineers and the

technical personnel. As a result, these efforts were less familiar to business decision makers.

- CIENA was also facing a depressed telecommunications marketplace characterized by a shrinking customer

set, a dramatic decrease in spending, and fierce competition.

- CIENA faced the new challenge of delivering integrated services instead of individual systems.

3)

a) Continue acquisition and execute new products to the market.

b) Concentrate on solutions to reduce costs of operating customer network

4) CIENA should concentrate on finding or developing products that help network/wireless company to lower

their cost and improve product efficiency.

By Eunice Wong, at 12:34 AM

Hi guys, here are my answers, Paul.

1a. How has CIENAs strategy evolved?

In 1992, CIENA was founded by physicist whose intention was to use his own-patented innovations around

DWDM technology, for cable television equipment market.

In 1994, the technology was focused on voice and data carrier market rather than cable television market.

It bet on the emerging technology to transform the economics of the telecom networks built by the service

providers. CIENA worked at establishing relationships and selling its product to both larger more established

telecom companies, as well as the numerous next generation companies entering the market.

In multiple cases CIENA acquired another companies that were developing desired technology rather than

develop it in house. Along with increased focus on successful execution of bringing technology to market

quickly, this allowed CIENA to get new cutting edge products to market faster than its competitors. Its

customers cycle for new technology was around 12 months and CIENA focused on meeting this cycle.
 1b. Why?

Because of heavy investment by telecom carriers to quickly expand network bandwidth, CIENA required new

technology it could develop quickly and bring to market ahead of its competition and to meet customer

needs.

2. What is the strategic situation facing CIENA in 2002?

CIENA faced increased competition from companies with varying technology strength, size and customer

penetration. Competitors were able to catch up to CIENA by increase in investment in new technology.

CIENAs customer base was impacted by economic downturn. The customer base was shrinking, spending

less and switching from building new networks to maintaining and optimizing their existing ones. Companies

stopped spending on new technologies and focused on reducing cost of operating networks.

3. What are CIENAs strategic options in 2002?

Develop End to End highly efficient, reduced cost network. Deliver integrated services instead of individual

systems.

4. What would you recommend they do?

Partner with another company and leverage existing CIENA customer relationships, marketing, sales and

development staff and staff to take advantage of changing telecom market.

By Paul_Herrin, at 9:50 PM

How has CIENAs strategy evolved? Why?

- Initial focus was on developing communication equipment around DWDM technology

- To take adavantage of being first in the market

- Believed in acquiring startup working in similar areas as more efficient process than building it in-house

- With market evolving quickly and fierce competition, innovation and building new cutting edge products

was emphasised

What is the strategic situation facing CIENA in 2002?

- Quite a few companies caught up with technology, they were no longer the only ones

- Losing the first to market advantage

- Decrease margins

- Carriers were in huge debts, market for new products started to shrink.
 - More demand for low cost, end-to-end products/services

What are CIENAs strategic options in 2002?

- Integrate internal efforts to develop end-to-end network

- Pursue top 30 to 25 carriers that were responsible for 80% of world's spending

- Balance short-term tactics with long-term

- Expand globally

What would you recommend they do?

- I think CIENA should get somewhat leaner to cut expenditure and focus on next generation techonolgy. If

it can't deliver the next best thing before other competitors then the company could die

- If it tries sustain itself, I don't think it can survive longer. It needs new product.

- Get back David Huber, partner with Corvis

By Sateesh, at 1:25 PM

Hi all, here's what I've prepared:

1a) How has Ciena's strategy evolved?

DWDM --> CoreDirector --> MANs

CIENA released its first commercial product based on Dense Wavelength Division Multiplexing (DWDM)

optical transport technology in 1996. Then in 2000, they released the first optical switch, CoreDirector.

Dr. David Huber (founder of CIENA) was planning to apply the DWDM technology to cable television market.

Jon Bayless of Sevin Rosen Funds, from who CIENA received venture capital in 1994, recommended Huber

to apply this technology to the voice and data carrier market.

In the middle of the 1990s, there was an exponential growth in the data traffic, network operators had to

increase their network capacity or lose customers to new competitors with better technology. CIENA sold to

these next-generation carriers.

In 1998, CIENA announced that it had agreed to merge with Tellabs, but before the shareholder vote, AT&T

informed CIENA that it had discontinued testing CIENA's transport equipment. This news resulted in

cancellation of merger talks, and CIENA's stock price fell to 1/10th of its previous value.
By the end of 1998, CIENA decided on working on new products.

1998, CIENA began in-house development of an intelligent optical switch. In 1999, they acquired the start-

up business with CoreDirector. In mid-2000, CIENA was the first to ship an intelligent optical switch. By the

end of 2000, CIENA was the clear market leader in optical switching.

From 2000, CIENA believed that the next growth area would be the metropolitan area networks (MANs).

CIENA chose to acquire Cyras Systems, developing a switch (K2) for MANs. In early 2002, CIENA acquired

ONI, combining its core optical networking and switching with ONI's metropolitan optical networking

capabilities.

1b) Why?

As a result of the dynamic structure of the industry and exponential growth in traffic, the companies with

solutions would stay alive while others would vanish in the blink of an eye. CIENA at first fought to invent,

later it found another solution, acquire small businesses with solutions.

2) What is the strategic situation facing Ciena in 2002?

* CIENA is surrounded in an intense competitive environment. Companies like Alcatel, Corvis, Lucent, Nortel

and Cisco have varying technology strength and customer penetration.

* The economic environment is depressed. The incumbents don't spend as much as they used to, since

they're in big debts. They sell raw data capacity at extreme discounts. The price drop results in a growing

competition.

* Big companies separate their domestic long distance business from other, more profitable businesses.

Since big companies act reluctant, small local businesses start emerging.

* Carriers are under heavy debt, they shift their focus from building new networks to maintaining and

optimizing the existing ones.

* Reducing costs is the new focus. Experienced executives with deep relationships are hired to shorten sales

cycles and attract new customers.

* Total telecom spending fell to an estimated $53 billion in 2002 from $92 billion in 2000 and affected all

equipment providers to some degree.

* Existing relationships become an advantage, since customers are concerned with ongoing upgrades,

maintenance, and support.

* CIENA's marketing and sales efforts focus on engineers and technical personnel.
 3)What are Ciena's strategic options in 2002?

CIENA believes that the company's future is end-to-end network. And instead of selling point solutions, they

focus on designing and selling of entire networks. This would be possible by use of a software suite, which

provided centralized network management and control.

In the meantime, there are technological changes in the optical network area. (multiplying fiber speeds, all -

optical network coming closer to reality, the growth of IP, capacity of broadband wireless technologies).

Strategic options:

** choose one or more of the above technological challenges and focus on them.

** acquire another company for its technology.

** partner with a leader or diversified company in the market

4) What would you recommend they do?

Since they're not new in the market, they have deep, existing relationships. My recommendation would be

to design and sell entire customized networks. This could be replacing the existing networks of the existing

customers. Even if they do not have the technology for innovation, they could acquire companies with the

existing developing technology.

By ozden, at 1:48 PM

Hi,

Here are my deep thoughts so far

_______________________________________________________________________

- Optical telecomunication technologies

- Strategy : getting an early technology lead in the market of optical telecommunication

- contracting marketplace

- fiber optic
- DWDM technology enabled all types of data : voice,video,internet traffic

- 1994 : decision:apply the tech to voice+data carrier market instead of cabe TV market.

- 1996-1998: ciena introduced its product to both long-dist provider (sprint, worldcom) and startups

- 1998 : competitive offerings DWDM transport category imposedprice pressure. Margin dropped.

--> basis for competitive advantage shifted from technology leadership to low-cost and large-scale

manufacturing.

ciena had the necessity to move from a one-product Co to find new ways to differentiate itself

- 98-00 :

intelligent optical switch - three-fold reduction in equipment, space and power requirements

tech aquired from aquisition.

product innovation through promising startup acquisition

tech contect : bandwith explosion

"We understand that providing a one-size-fits-all optical switch isn't the most effective solution for every

application. By engineering the intelligent platform of Ciena's larger optical switch specifically for smaller

central offices, service providers can rollout new, dynamic optical services to even more markets worldwide

- 00-02

dwdm product became more and more commoditized

strategy: Metropolitan Area Network - integrated end to end equipment solutions.

ciena acquired desired technology

In metropolitan networks, carriers traditionally have relied on low-capacity fiber rings for delivery and

protection of data services. As data continues to overtake voice traffic in the public network, the current

infrastructure is not a cost-effective means of transport, and the overlapping protection rings tend to be

expensive and slow to deploy. Ciena's Metro solution enables unprecedented capacity for optical transport

on existing fiber
Cisco:similar to ciena

industry made up of a few concentradted buyers of ciena's product - 30% carriers for 70% of purchases