UPDATE 2-Palm 4th-qtr rev outlook disappoints, shares dive

* Q3 loss ex-items 61 cts vs Street view 42 cts

* Q4 revenue forecast disappoints

* Shares slide 11 percent after hours

* Stock has fallen 40 pct since start of 2010 (Recasts, adds smartphone details, CEO's comment, updates shares)

NEW YORK, March 18 (Reuters) - Palm Inc forecast sharply lower than expected revenue in the fiscal fourth quarter on dismal smartphone sales, sending its shares 11 percent lower in after-hours trade on Thursday.

The share slide wiped out a 5 percent gain in regular trading and extended losses in Palm's stock, which has fallen 40 percent since the start of 2010.

Palm executives told analysts on a conference call that fourth-quarter revenue will be less than $150 million, or about half the revenue posted for the fiscal third quarter ended Feb. 26. Analysts had been expecting revenue of about $306 million, according to Thomson Reuters I/B/E/S.

The company has struggled to generate interest in its Pre and Pixi smartphones amid fierce competition from Apple Inc , Research in Motion Ltd , Motorola Inc and Google Inc .

On Thursday, it reported a net loss attributable to common stockholders of $22 million, or 13 cents a share, in the fiscal third quarter, versus a year-ago loss of $98 million, or 89 cents a share.

Excluding items, the company's loss was 61 cents a share, a bigger loss than the average analyst estimate of a loss of 42 cents a share, according to Thomson Reuters I/B/E/S.

Revenue came in at $349.9 million, and non-GAAP revenue totaled $366 million, well above Wall Street's average estimate for sales of $316.2 million.

The company shipped a total of 960,000 smartphones during the quarter, with sell-through of 408,000 units.

Shares of Sunnyvale, California-based Palm rose 5 percent to close at $5.65 on the Nasdaq on Thursday, but plunged 11 percent to $5.02 in extended trading. They had been down more than 40 percent in 2010. Short interest in its stock stands at more than 40 percent.

Despite expanding its carrier network to Verizon Wireless, in addition to Sprint Nextel, Palm has failed to generate much sales momentum. Retailers have been heavily discounting the company's devices, raising concerns about profitability. [ID:nN26184605]

Last month, the company slashed its third-quarter and full-year revenue targets on "slower than expected consumer adoption." [ID:nN25246210]

"Our recent underperformance has been very disappointing, but the potential for Palm remains strong," Chief Executive Jon Rubinstein said in a statement.

"The work we're doing to improve sales is having an impact, we're making great progress on future products, and we're looking forward to upcoming launches with new carrier partners." (Reporting by Gabriel Madway; Editing by Gary Hill and Matthew Lewis)