Treo smartphone maker Palm attributed its 70 percent third quarter revenue drop to a bad economy as sales of its mobile devices fell. Palm competes against Apple’s iPhone and RIM’s Blackberry in the smartphone market.

Revenue dropped sharply to $90.6 million from $312.1 million, and the company said unit sales of smartphones fell 42 percent from the same period last year. Palm reported a loss of $98 million or 89 cents per share in Q3 compared to a loss of $57 million or 53 cents per share during the same period a year ago.

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Palm is not alone among smartphone makers suffering through the recession. A recent Gartner report showed fourth quarter worldwide smartphone sales rose only 13.9 percent from the same period a year ago, marking the slowest growth rate ever recorded.

Palm says that its new device, the Palm Pre smartphone, is expected boost sales once released around the middle of 2009 with exclusive U.S. carrier Spring Nextel. The phone will go up a couple tough competitors, Apple’s iPhone and RIM’s Blackberry.