NSM: This Love-Hate Relationship Isn't Going Anywhere

Should you hate National Semiconductor (NYSE: NSM) for falling short on its sales -- or love the company for keeping up with earnings expectations anyway?

The analog chip dealer's third-quarter sales clocked in at $344 million, right at the bottom of management's previous guidance and well below the $352 million Street estimate. The company pointed to inventory corrections across its network of dealers and customers as a reason for the shortfall, exacerbated by the typical seasonal decline after the holiday gadget-building rush. But cost controls were in working order, and $0.24 of GAAP earnings was a figure in line with analyst targets.

Maybe we'll find some clues in fourth-quarter guidance? Well, a $360 million to $370 million sales range is just about in line with expectations, and the company doesn't do earnings forecasts. (Good choice, guys!) OK, not much help there.

On the other hand, management sees an end to the inventory correction that damaged the results of the past two quarters. Order bookings in the crucial mobile-phone chip division exceeded billed deliveries again, which is a great sign for upcoming revenue collections. But the story isn't unambiguously cheerful: The total order volume was flat from the second quarter, and the overall book-to-bill ratio for all product lines was below the ideal 1.0 water level.

National's stock has underperformed the S&P 500 benchmark over the past year and garners a middling three-star rating in our CAPS system. That's hardly impressive in the context of National's direct competitors:

Stock data from Yahoo! Finance.

National's sector is red-hot, but this particular stock has failed to catch a fever. Given the ups and downs in the third quarter, along with the lack of a clear growth driver going forward, National probably won't break a sweat in excitement anytime soon.

Will National Semiconductor turn things around with a terrific 2011? Add the stock to your watchlist, and you'll be sure to find out.