UPDATE 1-Palm posts wider loss, revenue plummets

*Q3 share loss $O.86, excluding items

*Q3 revenue $90.6 mln vs Palm target $85 mln-$90 mln

*Shares close at $7.71 on Nasdaq

NEW YORK, March 19 (Reuters) - Palm Inc PALM.O on Thursday posted a 70 percent drop in quarterly revenue, as the poor economy aggravated already weak demand for its older phones, and shipments of its new Treo Pro phone were delayed.

Palm, which has also been hurt by competition from rivals such as Apple Inc AAPL.O and Research In Motion RIM.TO, said its loss widened to $98 million, or 89 cents per share for the third quarter ended Feb. 27, from a loss of $57 million or 53 cents per share in the year ago quarter.

Excluding items such as stock-based compensation its loss would have been 86 cents per share.

Revenue fell to $90.6 million from $312.1 million.

On March 3, Palm said that it expected to report revenue of $85 million to $90 million, well below previous average analyst estimates of $155 million.

It had also forecast declining revenue and continued margin pressure from legacy products in the current quarter as it prepares to launch its highly anticipated Pre phone -- seen as its best chance to fight back against Apple’s iPhone and RIM’s BlackBerry. (Reporting by Sinead Carew; Editing by Bernard Orr)