NEW YORK (CNN/Money) - The near-term outlook for cell phone market share leader Nokia is getting more and more staticky by the day.

On Tuesday, tech research firm Gartner released a report showing that Nokia's share in the first quarter plunged from 34.6 percent a year ago to 28.9 percent.

And while this wasn't exactly an earth-shattering revelation -- Nokia warned in April that it lost share in the first quarter due to poor product mix and that second quarter sales would be lower than expected -- shares of the Finnish company still tumbled more than 2 percent in U.S. trading Tuesday morning.

Investors may have been unpleasantly surprised by the magnitude of Nokia's share decline. The stock is down nearly 33 percent since its early April warning. By comparison, Nokia's main rival Motorola has seen its stock rise nearly 10 percent since Nokia warned and 45 percent so far in 2004.

According to Gartner, Motorola, the No. 2 player in the cell phone business, boosted its market share from 14.7 percent a year ago to 16.4 percent in the first quarter of 2004.

So that begs the question: Is the stock finally a buy? After all, Nokia (NOK: Research, Estimates) is trading at just 14 times earnings estimates for 2005 while Motorola (MOT: Research, Estimates) has a P/E of 22.

Well, even though Nokia may seem like a compelling value, analysts say there are still a lot of reasons to steer clear of the stock.

For one, it's not as if Motorola is the only company that's gaining ground on Nokia. Samsung, the No. 3 company in the business, now controls 12.5 percent of the market, up from 10.8 percent a year ago. Siemens, Sony Ericsson and LG also all increased their market share slightly.

The big problem for Nokia, after years of maintaining a technological edge over rivals such as Motorola, was slowness in meeting the demand for many higher end phones -- such as camera phones and color screen models -- in Europe and the U.S.

Consumers have shown they are fickle when it comes to cell phones. They want what's hot, which means that brand loyalty might not really be that strong.

A bad connection Nokia is the only one of the top 6 cell phone makers to lose market share in the first quarter. Company  Market share 1Q 03  Market share 1Q 04  Nokia  34.6%  28.9%  Motorola  14.7%  16.4%  Samsung  10.8%  12.5%  Siemens  7.6%  8.0%  Sony Ericsson  4.7%  5.6%  LG  4.9%  5.3%   Source:  Gartner

So the concern now is that even when Nokia eventually does roll out more cutting edge products, analysts are not sure that consumers will flock back to buying the company's models.

"Nokia has given competitors an opportunity to catch up. I don't think the only thing that needs to happen is for Nokia to put out five new flip phones. It's not that simple," said Joshua Baylin, an analyst with Legg Mason.

Fortunately for Nokia, few expect the company to lose substantially more market share, especially since it has cut prices on many of its models. So the downside for the stock is probably limited.

But will Nokia be able to excite Wall Street and retailers with a line of new phones for the crucial second half of the year holiday shopping season? That's what it will take for shares of Nokia to gain back some of the ground they've lost since April.

Given this uncertainty, Baylin said he'd be wary of Nokia's stock.

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"Nokia is in a holding mode. At this point, you really are making a bet on products you haven't seen," Baylin said. "We're not in a position where we're ready to take that chance."

And T. Michael Walkley, an analyst with Piper Jaffray, said he thinks Nokia may continue to struggle to gain back share in the U.S., particularly since two major carriers, Verizon Wireless and Cingular, have begun to more aggressively promote new Motorola phones.

"Nokia is susceptible in the U.S.," said Walkley. "Market share will probably stay around where it is now for the rest of the year."

To be sure, investors should remember that it wasn't that long ago that Motorola was Wall Street's favorite cell phone whipping boy.

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Motorola was unable to get many of its new camera phones out on the U.S. market in time for last year's holiday shopping season but it has executed a stunning turnaround so far this year under the leadership of new chairman and CEO Ed Zander.

But Walkley said he doesn't see anything on the immediate horizon that would get investors to embrace Nokia to the same degree that they have Motorola recently.

"The earliest Nokia could gain back some share would be in the fourth quarter with new phones," said Walkley. "Nokia is a compelling value, but I wouldn't be surprised if you could buy the stock at the same levels for the rest of the summer."

Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking ties to the companies.

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