National Semiconductor Corporation (NYSE: NSM) generating 62.5% gross margins. Who would have thought?

National also announced a recapitalization in which the company will repurchase $2.4 billion in stock. Yesterday's announcement said the semi company will actually borrow money for the repurchase -- a big change for this industry which historically has avoided leverage.

Why the confidence? Brian Halla, National's CEO, said in last night's conference call that the recent semiconductor trough saw National's gross margins bottom at 59%. This is the second trough where National has been able to generate high margins and remain cash flow positive. Halla went as far to say that "smoother sailing is ahead". A bold statement for a highly cyclical industry.

Also, National is forecasting 1% to 4% revenue growth for the upcoming quarter which historically has been a down quarter. Higher-end value products which is leading to higher ASP and volume increases is driving the higher revenue, with billings up 16% and bookings up 33%.

ROIC was above 20% and National expressed confidence it can maintain this return level for both the short and longer term.

National is becoming a must own stock. Jump into this company, this could be the beginning of a big upswing.

National Semiconductor Corp. (NYSE: NSM) reported weak results last week and also gave a weaker profit guidance for the current quarter. Quarterly revenue fell 8% to $501.6 million from $544 million last year.

Brian Halla, National Semi's CEO, said there was no seasonal uptick for the holidays, which is not a good sign for the handset industry. National Semi makes system-on-a-chip semiconductors that go into many wireless phones. If National Semi's demand is down, that means demand is most likely down for Motorola Inc. (NYSE: MOT), Samsung and Nokia Corp. (NYSE: NOK).

Halla expects revenue to drop another 8% to 11% in this quarter. There is no reason for investors to bottom fish semiconductor stocks yet. It appears it will take a few quarters for the industry to bottom.