Programmable chips are a hot commodity these days. Sector rivals Atmel (Nasdaq: ATML), Altera (Nasdaq: ALTR), and Xilinx (Nasdaq: XLNX) have pulverized the S&P 500 in 2011 thanks to tremendous demand for flexible microchips that enable quick-to-market gadget development.

Here at Fool HQ, Xilinx is a very divisive stock. Not one but two of our premium newsletter teams have shorted the stock recently, citing ridiculous inventory inflation as a sign of coming revenue drops. But fellow Fool Rex Moore has noted that the stock features one of the strongest dividend yields and an attractive valuation relative to high-tech peers and chronic curmudgeon Seth Jayson notes the company’s attractive margins.

And I quite like the stock myself. In particular, I'm not terribly worried about rising inventories, because it's all feeding into an appropriate rise in sales and end-user demand.

So I'm not surprised to see Xilinx jumping as much as 5.9% today on a fine fourth-quarter report. $0.59 of earnings per share on revenue of $588 million was comfortably ahead of analyst targets. And yes, inventories spiked again, this time doubling year-over-year. I'm sure my bearish colleagues are scratching their heads today.

There's a reasonable explanation for the revenue situation, though -- at least if you believe what CFO Jon Olson is saying. The company is phasing out some older product lines and building up reserves of those products, just to keep existing customers with a need for last-generation chips happy for a while. Overstocked warehouses also came in handy when the earthquake and tsunami in Japan disrupted Xilinx's supply chains, though that's surely a coincidental benefit.

In all fairness, Olson noted that inventories of current products also rose this quarter, "maybe a little more than we'd like," and he wants to take that down in coming quarters.

All things considered, nothing much changed for Xilinx this quarter. If you hate the stock for its ballooning inventories, you'll hate it even more today. But if you saw a reasonably priced tech stock with a direct line to smartphones and tablets, you'll still like Xilinx after this report: the stock now trades for about 15 times trailing earnings with a perfectly reasonable PEG ratio of 1.1.

Can Xilinx do anything to change your mind, short of cleaning out its warehouses? Stay informed on Xilinx by adding the stock to your watchlist. It's a free service that connects you to the stocks that matter in a whole new way. Click here to get started.