Given the reaction by investors following IBM's (NYSE:IBM) recent first-quarter earnings results announced on April 18 -- its share price is down 6% -- combined with Cisco's (NASDAQ:CSCO) relative stability, it may seem obvious which stock is the better buy. But it's not quite so cut and dried.

Cisco didn't exactly knock its last quarter earnings out of the park, either, though its stock price is up about 4%. Setting aside the near-term impact of investor sentiment, IBM and Cisco have a lot in common. Both are in the midst of significant transitions and offer two of the tech industry's best dividend yields.

Graphic of Cisco's IoT solutions.

Image source: Cisco.

The case for Cisco

Long known for its dominant position in enterprise switches and routers, one of CEO Chuck Robbins' first orders of business upon taking the helm at Cisco was to initiate a transformation away from hardware and shift to a software, cloud, and recurring revenue model.

Last quarter was yet another example of Cisco's slow but steady progress. Total revenue declined 2% to $11.6 billion, which was in line with Cisco's guidance. The drop in sales was due to product revenue inching down 4% year over year to $8.49 billion, led by a 10% nosedive in router revenue.

However, Cisco's service sales climbed 5%, which offset its product woes and is right in line with its transition efforts -- and it gets better. A highlight of Cisco's fiscal 2017 second quarter was its deferred revenue growth in general, and recurring sales from its software and subscription businesses in particular.

Total deferred revenue -- a good indicator of future results -- climbed 13% to $17.1 billion. Cisco's recurring revenue climbed 51% to $4 billion. The shift to subscription-based, ongoing revenue requires patience, because investors are unlikely to see significant quarterly revenue gains, but rather steady progress quarter in and quarter out.

IBM researchers working with Watson.

IBM Watson. Image source: IBM.

The case for IBM

The transformation IBM is undergoing thanks to CEO Ginni Rometty's "strategic imperatives" has also resulted in total revenue declines. Unlike Cisco, investors appear more focused on IBM's sales results as a whole -- which dropped 3% last quarter to $18.2 billion -- than how the company is faring where it counts. And therein lies the opportunity.

Investors shouldn't ignore IBM's quarterly revenue; however, the two numbers that take precedence are growth in IBM's combined strategic imperative sales, and the percentage of its total revenue the key areas account for.

Last quarter, the key units combined, which include cloud, cognitive computing, security, and mobile markets, jumped 12% to $7.8 billion. This past quarter, strategic imperatives equaled 43% of IBM's total revenue, and for the past 12 months that figure has climbed with each passing quarter and now sits at 42%.

IBM's annual cloud revenue run-rate is a staggering $14.6 billion, putting it near the top of the heap in one of the fastest-growing markets on the planet. Well over half of IBM's cloud sales are service-related, which is where the real opportunities lie. IBM is moving in the right direction. The question is whether investors will give IBM the time it needs to complete its transformation.

The better buy

As noted, there are a lot of similarities between Cisco and IBM, not the least of which are their 3.5% and 3.75% dividend yields, respectively. The better stock to buy comes down to the amount of risk and patience an investor is comfortable with.

Cisco has won over many pundits who can see the writing on the wall: slow and steady growth for years to come. A sudden spike in share price isn't likely given Cisco's recurring revenue push, but the bottom isn't likely to fall out, either, making it ideal for risk-averse investors.

That said, patient value investors willing to ride a few ups and downs in the near term should give IBM a long look. IBM's stock price is down, its strategic imperatives upside is tremendous, and it's executing where it counts.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. The Motley Fool has a disclosure policy.