Spiking inventory on its own can be a huge red flag. It's not a good sign when warehouses start filling up because the company can't sell its wares.

But when you combine rising inventory with revenues on a pogo stick, you're more likely looking at a conscious effort to manage the business differently. And when gross margins also are reaching new highs at the same time, you have a winning combo: strong sales, strong pricing policies, and shorter delivery lead times out of stuffed warehouses to inspire even more customer confidence.

That's what's happening for Atmel (Nasdaq: ATML) these days. The company's fourth-quarter report last night put sales ahead of Wall Street estimates, gross margins haven't been this strong since the mid-1990s, and yes, inventories are on the rise.

It's all part of a concerted effort to bring down inflated lead times from the manufacturing constrained days of 2010. Atmel has stepped up its capital expenditures in recent quarters to build up its manufacturing and chip testing facilities, and this is how it all pays off.

The main reason for this strategy shift is the demand Atmel sees for its maXTouch touchscreen controllers. HTC started using that high-end Atmel chip in the Droid Incredible and continued with Sprint Nextel (NYSE: S) flagship EVO 4G; Samsung packs maXTouch into both smartphones and tablets; the Motorola (NYSE: MMI) Droid X uses the same chip; and on and on.

In short, top-of-the-line mobile computing gadgets not emblazoned with an Apple logo most likely come with Atmel's touchscreen controllers inside. I'd be ramping up my manufacturing lines, too, given that pleasant position.

That said, Atmel's stock doesn't come cheap. Trading at 27 times trailing non-GAAP earnings and 4.5 times sales puts Atmel in the nosebleed section when compared with more affordable rivals Fairchild Semiconductor (NYSE: FCS) or Xilinx (Nasdaq: XLNX). Sometimes you get exactly what you pay for, though.

The touchscreen controller market is becoming a two-horse race between Atmel and Cypress Semiconductor (Nasdaq: CY), which also trades at a premium to most other chip stocks -- and for good reason. I wouldn't buy either stock at these prices, but Atmel is going on my watchlist to help me catch it on a dip.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Xilinx is a Motley Fool Big Short short-sale pick. Cypress Semiconductor is a Motley Fool Rule Breakers choice. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written puts on Apple. Motley Fool Alpha has opened a short position on Xilinx. The Fool owns shares of Apple. 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.