BMO Capital Markets has downgraded Motorola Mobility Holdings (NYSE:MMI) to underperform from market perform, citing declining market share and margins.

We believe increasing competition in the Smartphone segment, particularly for Android products, will weigh on results, analyst Tim Long wrote in a note to clients.

Long said the company had a first-mover advantage, but now Samsung, LG and Sony Ericsson have joined HTC, and he expects each to out-ship Motorola Mobility this quarter. The company's lack of global reach is becoming more of an issue, he added.

We believe MMI lost half its Android share over the past year. We believe margin growth will be limited as increased competition holds gross margins down and opex is still too high relative to the other Smarpthone OEMs. We believe consensus views are much too aggressive for 2012, Long said.

The analyst also cut his 2011 pro forma earnings forecast by 13 cents to 73 cents a share and 2012 earnings view by 40 cents a share to 86 cents a share. Street expects the company to earn 77 cents a share for 2011 and $1.63 a share for 2012, according to analysts polled by Thomson Reuters.

Our new 2012 EPS estimate of 80 cents a share is half of consensus and shows little growth from 2011. We expect numbers to move lower throughout the year. We believe lower market share and limited margins will cause a decline in the stock, said Long, who reduced the price target on the stock to $19 from $26.

Shares of Libertyville, Illinois-based Motorola Mobility closed Monday's regular trading session at $22.82. In the pre-market hours Tuesday, they were down 1.23 percent to $22.54.