For the three months ended May 31, the Sunnyvale, Calif.-based company reported a loss of $43.4 million, or 40 cents per share, compared with a year-ago fourth-quarter profit of $15.4 million, or 15 cents per share.

Excluding one-time items, Palm reported a loss of 22 cents per share. Revenue fell 26 percent to $296.2 million from $401.3 million.

Analysts, on average, had expected a smaller adjusted loss of 18 cents per share and sales of $301.1 million, according to a poll by Thomson Financial.

Sales of Palm's low-price, low-margin Centro are strong, but they're offset by slowing sales of higher-margin Treos.

Palm sold a record number of smart phones in the quarter - 968,000 units, or 29 percent more than in the same period a year earlier.

Palm hopes the continued success of the Centro - which the company said has sold 1 million units since its fall launch - will pull it back into the black.

"The Centro is a smash success. We have a competitive product pipeline and are developing a world class software platform. I expect together these efforts will develop positive results in the coming years," Palm Chief Executive Ed Colligan told investors in a conference call Thursday.

Shares of Palm's stock closed Thursday at $6.54, down 30 cents, or 4.4 percent, and fell another 50 cents, or 7.8 percent, in after-hours trading.

Revenue fell, the company said, because sales of older Treo phones and Palm's traditional handhelds are slowing. Colligan said revenue would grow sequentially this quarter but losses would continue.

For all of fiscal 2008, the company lost $111 million, or $1.05 per share. That's down from a profit of $56.4 million, or 54 cents per share, in fiscal 2007. Full-year revenue dropped 16 percent to $1.32 billion.

Pablo Perez Fernandez, an analyst with Global Crown Capital, said he doesn't see the Centro rescuing Palm anytime soon. He expects sales of the Centro to peak within the next two quarters and predicts Palm will be in trouble again because it is historically very slow getting new products to the marketplace.

"The Centro's profitability is so much lower than the Treo (that) it may pull them out of the hole, but it will not reach levels that will make a difference," Fernandez said.

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