Starbucks Corp. (NASDAQ: SBUX) shares have left a taste in the mouth of shareholders almost as bitter as some of its brews as investors fretted about looming competition with McDonald's Corp. (NYSE: MCD) for the caffeinated consumer. Finally, the coffee chain, whose shares have plunged 48% over the past year, has woken up and smelled the over-priced Java.

The Seattle-based company ousted Chief Executive Jim Donald and replaced him with Chairman Howard Schultz, really the company's heart and soul.

In a letter released by the company, Schultz uses business school buzzwords such as "customer-facing" "customer-focused" and my favorite "re-igniting our emotional attachment with our customers" to discuss the mess in which Starbucks has found itself.

It has been assumed for several quarters that as McDonald's (NYSE: MCD) adds high-end coffee, Starbucks (NASDAQ: SBUX) might suffer. But, an analysis by Bloomberg shows that the coffee chain may be in for some very rough times. One money manager, speaking about McDonald's, told the news service, "They're a lot cheaper than Starbucks coffee in general, and they have the high quality to go with it.''

McDonald's says that it offers lattes, cappuccinos and iced brews in 9,000 U.S. restaurants. McDonald's coffee also tastes pretty good. Bloomberg reports that in March, a Consumer Reports taste test of basic black coffee found McDonald's stronger blend beat Starbucks, Burger King Holdings Inc. (NYSE: BKC) and Dunkin' Donuts Inc.

In June, rising sales of McDonald's coffee prompted Deutsche Bank Securities Inc. analyst Marc Greenberg to reduce his Starbucks stock-target price by 14 percent to $32. "The golden arches are doing coffee better,'' Greenberg wrote in an investors' note. He rates Starbucks as a "hold.''

Starbucks Corp. (NASDAQ:SBUX) Chairman Howard Schultz thinks the coffee chain can have its cake and it too.

In an interview with Bloomberg News, Schultz argued that the Seattle-based company can preserve the intimate nature of Starbucks even as it adds seen new stores a day.

``This is really hard to do,'' he said. "And because very few people have done it before, they're out there waiting for us to fall.''

There are indeed plenty of skeptics.

Shares of Starbucks have dropped more than 11 percent this year amid investors' concerns about Schultz's ambitious expansion plans and growing competition for the caffeinated consumer from rivals such as McDonald's Corp. (NYSE: MCD).

Analysts are far more bullish on the stock. Their median 12-month target is $43, more than $10 above where it trades today.

In his interview, Schultz said that consumers want more Starbucks, particularly in urban areas. That may be so, but the question is how many. There are more than 200 in Manhattan.

Do people really need a Starbucks on every block?