There's no doubt that chip stocks are a hot commodity these days. National Semiconductor (NYSE:NSM) got a little bit too hot, though -- even a stellar fourth-quarter report and a brilliant outlook weren't enough to justify its overheated share price.

National saw sales rise 10% over last quarter to $345 million, while also growing gross margins to 65.3% -- a sequential boost of 420 basis points. Retiring CEO Brian Halla and incoming leader Don Macleod explained that the focus so far has been on strengthening gross margins, which means disciplined pricing and manufacturing. Going forward, since National has hit a comfortable margin range, it's all about growing sales. This is a turning point in National's strategy.

The margin focus explains why National's sales have not kept up with the revenue pace that competitors like Texas Instruments (NYSE:TXN), Analog Devices (NYSE:ADI), and Maxim Integrated Products (NASDAQ:MXIM) saw last quarter. National has sacrificed a little bit of market share in return for a powerful pricing position. Still, on the whole its revenue held up better than that of many of its competitors since the recession started.

National is a premium provider of power-management chips for sectors like cell phones, LED lighting solutions, and automotive applications. There are National chips in every Apple (NASDAQ:AAPL) iPhone 3GS, many Research In Motion (NASDAQ:RIMM) BlackBerry models, and plenty of Google (NASDAQ:GOOG) Android smartphones, and the company counts the seven largest phone designers as customers.

Given that National also sports stronger gross margins than its chief competitors, the company looks ready to boost both sales and income in this blossoming market over the coming quarters. National's manufacturing lines are running at a mere 46% of full capacity, so it should be easy to pick up the slack as order volumes return to full health.

Despite all the positives, National is just a two-star CAPS stock today. I think it deserves better. You can help me correct this problem by grabbing a free CAPS account and giving National a thumbs-up rating today. Or, you know, the exact opposite if you think I'm wrong.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Google is a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days.You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.