Networking hardware giant Cisco Systems (NASDAQ: CSCO) beat analyst expectations across the board with its quarterly report last week, but the stock was punished, nonetheless. Revenue plunged 13% year over year even with some help from the acquisition of Splunk, and earnings declined by a similar amount.

Cisco has been pushing to increase recurring revenue and lower its dependence on one-off hardware sales. Revenue from subscriptions accounted for 54% of total revenue in the fiscal third quarter, which ended on April 27. That figure was boosted a bit by the acquisition of Splunk.

Despite all this recurring revenue, Cisco is still sensitive to the buying patterns of its customer base. The company's revenue suffered in the third quarter because its customers were overloaded with products yet to be installed. This excess inventory led to fewer orders in past periods -- orders were down 12% year over year in Cisco's second quarter.

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Source Fool.com