2 March 2014 Wireless Equipment Signals to Noise (S2N) Ciena - Benefitting from the shift to LTE We sum up comments on our quarter preview and our thoughts on optical network upgrade opportunities in FY14+, in our Quarter Preview - published alongside this MWC note. Our MWC conversations with Ciena's CT0 gave us insight on management's view on Alcatel Lucent selected recently as the second source supplier at Verizon, on 100G and 0TN switching upgrade opportunities this calendar year, etc. We get the read from our conversations with management that Verizon is likely to follow an 80/20 rule for its optical network sourcing - i.e. appx 80% of long haul and metro optical networking upgrades using Ciena's platforms and the remainder likely allocated to the second-source supplier. Further, we note that a meaningful runway for Ciena's Carrier Ethernet (Packet Networking) switches for aggregating traffic from 4G macro cells (and ongoing 4G small cell rollouts) at the major US and rest of world telcos - with Ciena noting that appx 50% of cell towers are lit by fiber — suggesting to us that there is appx a +30% runway remaining for "fiberization" of the radio access and metro aggregation network. AT&T's $146 over the next 2.3 years Project Velocity IP capex spend for utilizing IP based fiber networks for access traffic aggregation, etc - is a case in point. Ciena also noted potential for 1G to 10G access network upgrades in telco networks - as an out quarter refresh cycle opportunity for the company's Packet Networking portfolio. Ciena management also noted that they see around a 1VA 0TN switching attach rate in their 6500 series 100G packet/optical networking platform this year - suggesting to us that Ciena could manage to gradually improve the gross margin profile of their 100G platform, based on sales of mid 40s margin 0TN switching line cards embedded in their 6500 series platform. Management remains positive on strength in the 100G optical tra