THE DAY AHEAD: Analysts'' snooping sparks PC sales worries

COMMENTARY -- The Christmas shopping season is under way, and that means Wall Street's finest minds are watching your PC buying habits. In a game of one-upmanship, analysts are counting shopping carts in an effort to gauge PC demand.

Gauging PC demand is a Wall Street fad. Every year -- usually Thanksgiving weekend -- some analysts head to Best Buy and other electronics retailers to count how many iMacs, Compaqs and eMachines are being sold. This year's ritual has gained more importance -- analysts have to show their research is deep and valuable in the land of Regulation FD.

Yes folks, that guy hiding behind that aisle may be one of Wall Street's top gurus.

The fact is that it's a bit too early to glean a lot of information about PC sales, but that hasn't stopped analysts from issuing a barrage of research notes. PC Data reported a 9 percent to 10 percent decline in PC unit shipments through the retail sales channel. That stat has put PC watchers on high alert.

In a research note, Kevin McCarthy, an analyst with CS First Boston, noted that PC demand was mixed and indicated a potential drop-off compared to last year. "We surveyed floor sales personnel from 12 stores in a three-state area (New York, New Jersey and Texas) and the general theme of their responses was mixed with respect to weekend demand," he wrote.

McCarthy reckons that there is no dominant trend this holiday season and we'll see "slightly below average" PC sales. Below average means 7 percent consumer growth compared to 38 percent in 1999.

He noted that Compaq's (NYSE: CPQ) all-in-one PC, which sells for $899, is a big seller, along with Apple's (Nasdaq: AAPL) iMac. However, folks weren't walking out with many of Apple's G4 Cubes, and McCarthy expects the company to advertise aggressively to lower inventory.

Not to be outdone was Salomon Smith Barney analyst Richard Gardner. He issued a research note that warned about Apple, Compaq and a few others. "Apple is working hard to clear out the channel ahead of January product announcements," he wrote. "The December quarter's operating loss may be wider than expected."

Gardner's checks, which covered several Bay area retail stores, could indicate that inventory levels are up at a time when demand is down. "Most major PC OEMs are already stuck with one of two options: continue filling the channel to meet 4Q consensus expectations and pay with inventory write-downs during 1Q; or scale back build plans for the fourth quarter and miss 4Q expectations," said Gardner.

Here's the early line (we emphasize early) on the big consumer PC vendors: