WIMBLEDON, England - The serve was clearly out. The line judge called it out. Both players knew it was out.

Everybody on Centre Court seemed to know it was out - everybody, that is, except for the chair umpire.

The scoring error by umpire Ted Watts contributed to a stunning upset of Venus Williams at Wimbledon, a result that erased the chance of a third-straight All England Club final against sister Serena.

"I like to think he didn't do it on purpose," the two-time champion said after losing 7-6 (5), 7-6 (6) to Croatia's Karolina Sprem in a second-round match Thursday.

The mistake by Watts - which gave Sprem an extra point during the second tiebreaker - didn't decide the match. But it certainly could have influenced the outcome, and it left players, officials and fans wondering how such a thing could ever happen.

The error came with Williams leading 2-1 in the tiebreaker. Sprem's first serve to the ad court was wide, and the line judge put her arm out and shouted, "Fault!"

Williams casually hit the ball back. Sprem hit a backhand into the open court with Williams standing still, figuring the point was over.

Watts incorrectly called the score as 2-2, giving Sprem a point when instead she should have been taking a second serve.

The players took no notice and lined up in the same positions for what they thought was a second serve. Sprem hit an 86 mph serve, and Williams responded with a backhand return winner.

That should have made the score 3-1, but Watts called it 3-2.

Both players appeared confused, but neither disputed the call.

Williams then moved out to a 6-3 lead, giving her a great chance to even the match and set up a decisive third set. But she squandered three sets points and lost five straight to finish the match.

"Obviously the umpire did make a mistake," tournament referee Alan Mills said. "Whether the umpire didn't hear the call of out, I don't know.

"As neither player queried the score with the chair umpire at the time, the result stands as the mistake should have been rectified immediately."

Williams didn't blame the scoring error for the defeat - her earliest exit in a Grand Slam tournament since a first-round loss in the 2001 French Open. It also is her worst result at Wimbledon since losing in the opening round in 1997.

"I'd like to think one point doesn't make a difference," Williams said. "But, obviously, it was a wrong call."

So why didn't she point out the mistake at the time?

"Because sometimes I do lose track of the score, and I just felt that maybe I had lost track again," Williams said. "I'm not an arguer, either. If the ball's called in or out I stay with the call unless it's on clay. Other than that, I just let the umpires do their jobs."

Sprem said she wasn't sure about the score and just played on.

"I didn't think about this," she said. "I was like 100 percent in the match."

Williams, the Wimbledon champion in 2000 and 2001, hasn't advanced past the quarterfinals of a Grand Slam event since last year's Wimbledon final. That's when she lost for the second straight year to Serena in the championship match. Serena faced a second-match Friday against French qualifier Stephanie Foretz, ranked No. 135.

Critics have said Williams' game has suffered as a result of all the time she devotes to off-court pursuits, including fashion design and interior decorating. She also missed six months because of an abdominal strain, then twisted an ankle while beating Sprem at the German Open in May.

Asked what she would say to those who contend her game is in decline, Williams said, "I think that's pretty harsh."

Venus gave full credit to the 19-year-old Sprem, who is ranked No. 30 but has never won a tour singles title and has earned just over $300,000 in career prize money - compared to 31 singles titles, including four Grand Slams, and more than $13 million in prize money for Williams.

"She played really well, she deserved to win," she said.

The Williams match overshadowed victories by Andy Roddick, Roger Federer, Lleyton Hewitt and Goran Ivanisevic, and a second-round defeat for former nine-time champion Martina Navratilova.

The 47-year-old Navratilova, playing singles at Wimbledon for the first time in 10 years, lost 3-6, 6-3, 6-3 to Gisela Dulko - the same player who beat her in the first round of the French Open last month.

"I'm disappointed - not that I lost, but that I didn't play my best tennis," she said.

Navratilova now goes into the doubles and mixed doubles. She won the mixed here last year with Leander Paes, and has a total of 10 doubles and mixed doubles titles at Wimbledon.

"Practice is over, now the real tournament starts for me," Navratilova said. "It was always about doubles and mixed. Now I'm ready to hopefully win one of those or both."

Ivanisevic, the 2001 champion who missed Wimbledon the last two years with injuries and is retiring after these championships, tossed his racket and shirt into the crowd after outlasting Italy's Filippo Volandri, 4-6, 7-6 (8), 1-6, 6-3, 6-4.

That set up an intriguing third-rounder against Hewitt, the 2002 champion who has beaten Ivanisevic in both previous matches - both on grass.

"He's the favorite, for sure," Ivanisevic said. "But with me, you never know. When I have my day, then I can be dangerous."