Cisco Systems Inc. marked another small step in its long slog toward becoming more of a software company with a seventh straight decline in quarterly revenue.

The world’s largest maker of network switches and routers that move data over a large chunk of the Internet and large corporate networks said today that it earned a fiscal fourth-quarter profit before certain costs such as stock compensation of $3.1 billion, or 61 cents a share, down from 63 cents a year ago. Revenue fell 4 percent, to $12.1 billion.

Cisco did report more progress on its transition from hardware sales to subscription revenues, as mostly subscription-driven deferred revenue rose 23 percent from a year ago, making up 12 percent of total revenue. That metric is closely watched for progress in Cisco’s journey to a software future.

“Seeing strong non-recurring revenue numbers is a positive indication of the transformation that Cisco has to undertake,” said Eric Hanselman, chief analyst at 451 Research. “More traction there would be useful, but this is solid progress.”

Chief Executive Chuck Robbins (pictured) highlighted the recurring revenue, noting that subscriptions are now 51 percent of overall software revenue. But on he earnings conference call, he acknowledged Cisco’s challenges. “We’re working on a multiyear transition,” he said. “While I’m happy with our progress, it’s clear we have more to do.”

Like other traditional tech companies, Cisco has been struggling to contend with massive changes cloud computing is wreaking on the information technology industry. To contend with that shift, Cisco has been trying to restructure itself to focus on priority areas such as security, the Internet of Things, collaboration, next-generation data centers and cloud computing. But revenues of its core switching and routing businesses each fell 9 percent from a year ago, and the new businesses won’t make up the difference for years to come.

“What we’re seeing with the revenue declines is a trend we are seeing with most all enterprise companies,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “Successful enterprise technology providers, for the most part, are all experiencing the same challenge: how to add ‘cloud-native’ revenue at a faster pace than declining ‘traditional enterprise’ revenue.”

Competition in Cisco’s own core networking business is also an issue. J.P. Morgan analysts said in a recent note to clients that rivals are likely taking share. Juniper Networks Inc. saw a 31 percent rise in revenue and Arista Networks Inc. a 51 percent jump in their most recent quarters.

Cisco has also bought companies to accelerate its move to software. In May, it announced plans to buy Viptela Inc., a five-year-old upstart rival maker of software to create companywide data networks without the cost of dedicated hardware, known as software-defined networking.

Analysts polled by FactSet had expected an adjusted profit of 61 cents a share, in the middle of Cisco’s own forecast of 60 to 62 cents. Wall Street had forecast $12.07 billion in revenue, close to the top of Cisco’s own forecast range of $11.88 billion to $12.13 billion. For the year, the experts expected a $2.38-a-share profit, a hair above $2.36 a year earlier, on a 2.7 percent drop in revenue, to $47.94 billion. Actual 2017 revenue came in at $48 billion, down 2 percent, and profit was $2.39 a share.

Despite Cisco’s results meeting or exceeding forecasts, the report didn’t thrill investors, and shares were falling more than 1.7 percent in after-hours trading. In regular trading, shares had crept up a little under 1 percent, to $32.34 a share. Update: Shares were falling more than 4 percent in morning trading Thursday.

In particular, it appeared that investors were hoping for better growth in Cisco’s relatively small security business, which includes network firewalls and breach detection products, because it’s one of the company’s key focus areas. Revenues rose 3 percent, to $558 million, short of the $580.5 million analysts had forecast.

“The security numbers are concerning and I understand the take that this is timing-related, but this should be a quarter with much stronger performance, if you compare it to other security peers,” said Hanselman.

Revenue from Cisco’s switching business fell 9 percent to $3.44 billion. That missed analysts’ average estimate of $3.57 billion, Reuters reported, though that appeared to be partly customers waiting for a new switching system introduced in June to be available. But revenue in the wireless business, up 5 percent, and the data center business, down 4 percent, both topped analysts’ estimates, offsetting the security revenue shortfall.

During its financial analyst conference in June, Cisco said it expects annual revenue growth of only 1 to 3 percent over the next three to five years — way down from its former outlook of 3 to 6 percent. It confirmed that estimate today. It also said it expects an adjusted profit of 59 to 61 cents a share in the current quarter.

Although its software business is expected to grow by 12 to 15 percent a year, subscriptions are paid over multiple years, not in one big chunk like hardware-software bundles. That means subscriptions, even though they provide steadier revenue over time, depress near-term revenue growth — in Cisco’s case, to the tune of 2 to 3 percent, or $1 billion to $1.5 billion a year. Nonetheless, some analysts are hopeful things could turn around sooner than later. “We think the revenue profile could be close to bottoming in the near term,” Barclays analyst Mark Moskowitz wrote in a note to clients.

Cisco hasn’t given up on its hardware business by any means, but it’s trying to add in a subscription component as well. In a bid to recharge its declining core business, Cisco in June introduced a new edition of its network switching equipment, dubbed the Catalyst 9000, along with a new subscription plan for its services, both aimed at making it easier for customers to manage data on their corporate networks.

Robbins said on the earnings call that in the four weeks it has been available, more than 200 customers have ordered the 9000. He said a “large majority” of customers are adopting the advanced subscription option.

The company also is trying to move into more strategic applications. Although revenue increases in security and wireless were small, they’re still promising versus declines in Cisco’s other businesses, Moorhead said.

Photo: Robert Hof