A doomsday analysis sees Apple, fat on margins, overtaken by a pack of hungrier rivals

Simplicity to enable a revolution check out the comparison between the blackberry and the I phone. Aivars Lode avantce

A doomsday analysis sees Apple, fat on margins, overtaken by a pack of hungrier rivals

Apple losing the upgrade race. Click to enlarge.

FORTUNE -- Apple (AAPL) investors aren't going to like it, but it behooves them to consider "Can a Leopard Change its Spots," Paul Sagawa's critical analysis of the company's competitive position vis a vis Google (GOOG), Microsoft (MSFT) and Amazon (AMZN).

Sagawa, a former analyst at Stanford Bernstein, now covers technology, media and telecom for Sector & Sovereign Research in Stamford, CT.

Posted Nov. 19, the first trading day after Apple's share price hit a nine-month low, his doomsday view is a bracing tour of the mindset of the traders who knocked $187 billion off the company's market value in eight weeks.

"Apple is at a crossroads," Sagawa begins. "After dominating the first decade of the millennium, the revolution that Apple started is shifting against it. The iPhone, with its single annual update and super premium price, has been run down from behind by a pack of rivals with segmented product ranges, 6 month product cycles and aggressive price points. Android phones now outsell Apple 5 to 1, and the iPad is on the same path, exacerbated by rivals willing to subsidize device sales in pursuit of e-commerce and advertising. At the same time, the nexus of the user experience is shifting off of the device and into the cloud, greatly disadvantaging Apple vs. its web-savvy rivals."

The headings of the paragraphs that follow will give you a sense of where he's headed:

• Apple caused a paradigm shift and reaped a windfall, but now faces strategic challenges that will require changing the company DNA.
• Android smartphones outsell iPhone 5 to 1 worldwide, while aggressive subsidies on new Android tablets threaten the iPad hegemony.
• Apple is accelerating its refresh cycles and broadening its product line, but can only slow its market share losses while accelerating margin erosion.
• Platforms are integrating cloud services as critical elements of the user experience, but Apple is far behind in the skills and infrastructure necessary.
• The slowly emerging opportunity for mobile platforms in the enterprise is huge, but Apple is poorly positioned to exploit it.
• Apple's "Thermonuclear War" is a costly, and ineffective distraction – broad cross-licensing agreements are inevitable and beneficial to shareholders.
• Apple must adapt or risk repeating its mistakes from the MacIntosh (sic) era.

"If any company can rise to this challenge," the full report concludes, "it could be Apple, which rose from the dead some 15 years ago. It seems to have recognized its vulnerability and it has management talent, business momentum, and its prodigious cash hoard to help it succeed. Given its assets and opportunities, there is a reasonable case that Apple, after its recent tumble, is more than worth the risk longer term. Unfortunately, Apple's investors are a skittish sort and a message of comprehensive transformation might not be well received. Still, if Jeff Bezos can convince the equity market to wait patiently for Amazon‟s profits, perhaps Tim Cook can do the same for Apple."

You can read Sagawa's 1,000-word introduction on his blog. To get the full report, you have to contact SSR.