CIENCiena

We estimate future customer demand for our products to determine the appropriate reserve for excess and obsolete inventory. Forecasted demand is based on customer backlog, historical usage and sales forecast by product line. We write down inventory that has become obsolete, slow-moving or unmarketable to reduce its carrying value to the estimated net realizable value. Inventory write downs are a component of our product cost of goods sold. Once recorded, inventory is established, write-downs establish a new lower cost basis for that inventory, and subsequent changes in facts and circumstances do are not result in the restoration or increase in that newly established cost basis. reversed. In an effort to limit our exposure to delivery delays and to satisfy customer needs, we purchase inventory based on forecasted sales across our product lines. Beginning From time to time, we may purchase products in the second half excess of fiscal 2021, we started placing significant, advanced orders near term demand due to supplier last time buy requirements, or for supply of certain long lead time components other strategic reasons. We continue to address our expected customer demand for fiscal 2022 manage long-lead component purchases and the then-emerging supply chain challenges. During the second half of fiscal 2023, supply for certain long lead time components began to stabilize, non-cancelable commitments with contract manufacturers and the need to place advance orders decreased for these components. suppliers. As of November 1, 2025 and November 2, 2024 and October 28, 2023, 2024, we had $2.1 billion and $1.7 billion, for both fiscal periods respectively, in outstanding purchase order commitments to our contract manufacturers and component suppliers for inventory. In addition, part of our research and development strategy is to promote the convergence of similar features and functionalities across our product lines. Each of these practices exposes us to the risk that our customers will not order products for which we have forecasted sales or will purchase less than we have forecasted.

We rely on internal business processes and information systems to support key business functions, and the their efficient operation of these processes and systems is critical to managing our business. Our Additionally, our business processes and information systems must be sufficiently scalable to support the growth of our business and may require modifications or upgrades that expose us to operational risks. business. We regularly pursue initiatives to scale, transform and optimize our business operations and IT systems through the reengineering of certain processes, processes and investment in automation, including the use of AI. These initiatives may be costly, disruptive and engagement of strategic partners or resources to assist with certain business functions. For example, to enhance impose operational efficiency risks, including the need for system upgrades, new internal controls, and modernize our supply chain operations, we are pursuing a number of digital technology transformation efforts, including advanced analytics, automation, and other digital solutions. change management initiatives. In addition, our business may begin to operate in new markets and through new supply chain models that may require different internal processes to manage. These changes require a significant investment of capital and human resources and may be costly and disruptive to our operations, and they could impose substantial demands on management time. These changes may also require changes in our information systems, modification of internal control procedures and significant training of employees or third-party resources. Our IT systems, and those of third-party IT providers or business partners, providers, may also be vulnerable to damage or disruption caused by circumstances beyond our control, including from catastrophic events, power anomalies or outages, natural disasters, severe weather events, or impacts of climate change, anomalies, data security related incidents, and computer system or network failures. There can be no assurance that Our inability to effectively manage risks associated with our business systems or those of our third-party business partners will not be subject could result in significant operational disruption and cost, which could damage our business and harm our ability to similar incidents, exposing us to significant cost, reputational harm and disruption or damage to profitably grow our business.