The 72 percent fall in smartphone revenue, to US$77.5 million, underscores the importance of the upcoming Palm Pre and WebOS to the company's future. Palm announced the Pre and its brand-new operating system at the Consumer Electronics Show in January and has said the current Centro phone will be the last device to run the original Palm OS. The Pre will begin shipping on an undisclosed date later this year.

In its fiscal third quarter, ended Feb. 27, Palm lost $98 million, or $0.89 per share, wider than its loss of $57 million, or $0.53 per share, a year earlier. Excluding special items, such as stock-based compensation and restructuring charges, the company lost $94.7 million, or $0.86 per share. That was worse than the consensus forecast of analysts surveyed by Thomson Reuters, who expected a loss of $0.59 per share.

Total revenue was $90.6 million, compared with the analysts' forecast of $105 million.

"We're proceeding through a challenging transitional period, however our current results shouldn't overshadow the tremendous progress we've made against our strategic goals," Palm President and CEO Ed Colligan said in a press release.

The Pre will have a touch screen plus a physical keyboard, as well as built-in Wi-Fi, a 3-megapixel camera and 8GB of storage. It will also have some software features found in Apple's iPhone, such as gesture-based "multitouch" controls. In fact, comments by an Apple executive in January hinted that the company might sue Palm for stealing features.