Palm reported strong fourth-quarter sales of its entry-level Centro handset on Friday, but the Centro’s low price tag and lower gross margins plunged the struggling US smartphone and PDA manufacturer into a bigger than expected $43.4m loss.

Investors reacted to the loss, equivalent to 40 cents a share, and a 26 per cent decline in revenues to $296.2m in the three-month period ended May 31, by marking Palm’s shares sharply lower.