Palm sales reported a drastic decline in its fiscal third quarter. This dip in sales has erased the company's stand against top smartphone makers such as Apple and Google.

Palm quoted its revenue to be $350 million for the quarter, which happens to be more than forecast made last month. The company expected the figures to be anywhere between $285 million and $310 million. On net front, the company encountered a loss of $22 million, or 13 cents a share. The report brought down the stock price almost by 13.5%, or 77 cents to $4.88 per share in after-hours trading.

Palm, one of firsts in the smartphone industry, hoped to gain market share following the release of webOS the new operating system, led by the Pre. However, Palm lost its ground to smartphones built by Google's Android operating system, a newcomer in the market.

Google's Nexus One took the leftover market share from Palm, who already was facing the heat from Apple's iPhone.