Believe it or not, one of the oldest semiconductor companies in the world is now in its 50th year of operations. Even more interesting is the fact that it's not in the Silicon Valley. To find these folks, you have to go to South Portland, Maine.

Fairchild Semiconductor (NYSE: FCS) offers a broad portfolio of components for electronic applications in the computing, communications, consumer, industrial and automotive markets. Products include logic chips, power and signal components, optoelectronics, non-volatile memory chips and diverse categories of analog and mixed-signal chips. The company also provides contract manufacturing services to other semiconductor makers. Competitors include Texas Instruments (NYSE: TXN) and Intel (NASDAQ: INTC).

The Street was surprised last week, when the firm reported Q3 EPS of 27 cents and revenues of $426.8 million. Analysts had been looking for 20 cents and $420.9 million. The CEO attributed the solid quarter to robust computing and handset demand and to operating expense controls. Management also issued in-line guidance for Q4 revenues and estimated that gross margin would be about 50-150 basis points higher (quarter to quarter). FCS shares popped on the news and have now begun to define a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

One of the world's oldest semiconductor firms is now in its 50th year of operation. Is it headquartered in the Silicon Valley? No. To find this outfit, you have to go to South Portland, Maine.

Fairchild Semiconductor (NYSE: FCS) offers a broad portfolio of components for electronic applications in the computing, communications, consumer, industrial and automotive markets. Products include power and signal components,logic chips, optoelectronics, non-volatile memory chips and diverse categories of analog and mixed-signal chips. The company also provides contract manufacturing services to other semiconductor makers. Competitors include Texas Instruments (NYSE: TXN) and Intel (NASDAQ: INTC).

The stock has gained ground over the past week, on upside for the semiconductor group and Robert W. Baird's upgrade of the issue to "outperform" (target $26). Baird noted improving analog and discrete trends, strong bookings for Q3, and rebounding notebook and mobile phone demand.

We blogged late last fall about semiconductor stocks fundamentals rolling over. It appears semi management is beginning to whisper more and more of moderating results to analysts:

• Lehman cuts Micron Technology Inc's (NYSE: MU) estimates and sees losses for the next three quarters. The increase in demand for memory chips due to Microsoft Corporation's (NASDAQ: MSFT) Vista demanding more memory is not happening.
• Pacific Crest Securities wrote second quarter chip demand is underwhelming, with notebooks and the Nintendo (OTC: NTDOY) Wii the only bright spots.
• J.P. Morgan wrote consensus expectations for both the second quarter and all of 2007 are too high and is trimming estimates, The more significant earnings misses could come from Advanced Micro Devices Inc (NYSE: AMD), Cypress Semiconductor Corporation (NYSE: CY), Intel Corporation (NASDAQ: INTC) and On Semiconductor Corporation (NASDAQ: ONNN); with smaller cuts for Texas Instrments Inc (NYSE: TXN), Broadcom Corporation (NASDAQ: BRCM), Altera Corporation (NASDAQ: ALTR), Xilinx Inc (NASDAQ: XLNX) and Fairchild Semiconductor International (NYSE: FCS).

We began blogging about a slowdown in semiconductor stocks in November. However, most of this slowdown could be coming to an end. It appears from both National Semiconductor Corporation (NYSE: NSM) and Texas Instruments recent earnings releases that both companies are seeing the industry downturn ending as inventories have been worked down and backlog is beginning to build again.

The other major points we have been making is that we are entering the seasonally weak period for these stocks. So be cautious about jumping in with both feet in the early Spring.

Most likely, the two drivers for these stocks is the Fed lowering rates or the typically seasonal pick up which occurs in late summer. Since the Fed is on hold, there appears to be no need to jump into these stocks yet. Let the bad news hit these stocks and then start bottom fishing.