Silicon Laboratories (Nasdaq: SLAB) has been firing on all cylinders lately, outperforming not only outside expectations, but also management's own targets. Alas, you wouldn't know that from looking at a stock chart. The company's stock plummeted before ending the past year roughly flat, even though Silicon Labs' gross margin has been running significantly ahead of plan.

The stock suffered after earnings because management told us that those margins are coming back to the target range again. Fourth-quarter earnings of $0.46 per share and $112 million in sales both beat analyst expectations, and revenue will be strong again in the next quarter.

However, Silicon Labs enjoyed some price breaks from Taiwan Semiconductor Manufacturing (NYSE: TSM) and other manufacturing partners back in 2009, when chip factories stood comparatively idle. Now those contracts are expiring. Margins stayed strong in 2010 because Silicon Labs' customers were willing to pay higher prices in order to establish chip supplies in a higher-demand market. That dynamic is also coming to an end, leaving gross margins sinking back toward the company's long-term goal of 62% to 65%. In fiscal 2010, the gross margin sat at nearly 66%.

That's why the stock fell more than 7% yesterday. But margin trajectories aside, Silicon Labs claims to have some growth catalysts coming into play; its video products should triple in sales this year. Its new TV tuner chips sell at below-average margins, but have been picked up by several TV manufacturers, paving the way toward strong sales.

That's impressive in the face of established competition from Texas Instruments (NYSE: TXN), Broadcom (Nasdaq: BRCM), and Trident Microsystems (Nasdaq: TRD), just to name a few of the better-known alternatives. But that's what you get when you deliberately optimize your product for high performance rather than cost savings. Impressing your customers at the gadget-design table can make a difference.

Will video-chip sales in 2011 finally provide the catalyst our Stock Advisor team has been expecting for the last six years? Only time will tell, but the early adoption of these tuners is a good sign.

Add Silicon Labs to your watchlist to stay on top of the situation.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Silicon Laboratories is a Motley Fool Stock Advisor choice. The Fool owns shares of Texas Instruments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.