Updated from 4:29 p.m. EDT

SAN FRANCISCO -- Disappointed investors sent shares of Palm ( PALM) down nearly 5% after the smartphone maker reported a first-quarter loss and guided below analysts' expectations for the second quarter.

Palm said Monday that it lost $841,000, or 1 cent a share, compared to a profit of $16.5 million, or 16 cents a share, a year ago.

Excluding charges, the company posted earnings of $9.7 million, or 9 cents a share, beating Street expectations by a penny.

Revenue for the quarter grew slightly to $360.8 million, above analysts' expectations of $359.9 million. Revenue mix for the quarter was 84% smartphones and 16% handhelds.

Shares of Palm were recently off 77 cents, or 4.9%, to $15.22 in after-hours trading.

Smartphone revenue for the quarter was up 12% from a year ago to $302.2 million. The average selling price for smartphones declined to $431 per device due to a "higher mix of newer products that command lower prices and additional mail-in rebates for older models," said Palm. The company's handhelds business declined 33%.

Gross margin for the quarter decreased to 36.3% compared with 37.1% in the year-ago period and 38.3% sequentially. The reduction in gross margin is largely a result of new products being introduced at "aggressive price points" to expand its reach in the market, said Palm.

Palm introduced a new thinner and more affordable device called Centro last week, priced at $99. Centro will be available on Sprint ( S) starting mid-October, but the exclusive deal with the service provider is for 90 days only, said Palm.

For the second quarter, Palm said it expects revenue between $370 million and $380 million, below expectations of $407.5 million.

Palm expects to report a second-quarter loss of 1 cent to 3 cents a share. Excluding charges, it expects to report EPS of 6 cents to 8 cents a share. Analysts were expecting earnings before items of 10 cents a share.

Gross margin is expected to be in the range of 33.3% and 33.8%.

The company's second-quarter results assume no changes from its recent recaptilization deal with private-equity firm Elevation Partners. Palm accepted a $325 million investment from Elevation Partners in June, agreed to borrow $400 million in an associated debt financing and make a cash distribution of $9 a share to its investors.

Palm expects to close that deal at the end of this month and said it will update guidance to reflect the capital structure changes.

The company also took a charge to its first-quarter earnings of between $8 million and $10 million related to organizational changes and costs associated with its decision to abandon its ill-fated Foleo product.

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