International Business Machines, the largest computer-services provider, dropped as much as 6.4% last night after sales fell for the sixth quarter in a row and its hardware business posted a loss.

Revenue dropped 4% to $23.7 billion in the third quarter, the New York-based company said last night.

That was $1 billion less than analysts had estimated, according to data compiled by Bloomberg.

IBM’s shift to higher-margin software and services has failed to make up for a slump in sales of servers and other computer hardware.

Even the company’s traditional growth markets - developing economies overseas, including China - are not helping to prop up sales.

IBM posted the first revenue decrease in those markets in its history last quarter.

The company said it lost $713m in its hardware business in the first nine months of this year, compared with $253mn in profit in the year-earlier period. Revenue from growth markets shrank 9% last quarter.

Chinese sales tumbled over 20% as the country worked on a plan for economic policy, IBM's chief financial officer Mark Loughridge said.

To make up for the slowdown, the company is looking to cloud computing - the delivery of software and services online - and it reported revenue from that market for the first time yesterday.

IBM said it generated more than $1 billion in revenue from cloud products and services in the quarter. The disclosure follows an investigation by the US Securities and Exchange Commission into the finances surrounding IBM’s cloud business.

Net income rose 5.7% to $4 billion, or $3.68 a share, from $3.8 billion, or $3.33, a year earlier. Excluding some items, earnings were $3.99 a share in the period, topping the $3.96 predicted by analysts.

The company is working to rid itself of commodity products, shifting instead toward software-focused businesses that generate higher profit margins. IBM yesterday reiterated its goal of reaching $20 a share in earnings by 2015, up from $15.25 last year.

IBM agreed to sell off its customer-service unit to Synnex for $505m in September. It is also spending more than $800m to buy Trusteer, a software security company, people familiar with the deal said in August.

In July, IBM acquired SoftLayer Technologies, a cloud- computing storage provider that will help it compete with It paid almost $2 billion this year for the Dallas-based company, sources said.

IBM’s hardware business continued to drag the company down, with revenue declining 17% in the third quarter. Chief executive Ginni Rometty shook up the management of the division in April, replacing Rod Adkins with Tom Rosamilia, who had been overseeing corporate strategy.

“We are taking action to improve execution in our growth markets unit and in the elements of our hardware businesses that are under performing,” Rometty said in yesterday’s statement.

The company had also been trying to sell parts of its server division to Lenovo Group, before discussions broke down in early May due to disagreements over price, people familiar with the matter said at the time.