Updated from 1:04 p.m. ESTNational Semiconductor ( NSM) outpaced the Street's earnings and revenue expectations Thursday, boosting sales 22% year over year in its fiscal third quarter. The Santa Clara, Calif. chipmaker said sales for the three months ended Feb. 26 totaled $547.7 million, exceeding the range it projected in December of $527.6 million to $544 million in sales. Analysts polled by Thomson First Call had forecast that National's top line would be $536.6 million. During the same period last year, National generated $449.2 million in sales. National earned $130.1 million in net income, or 37 cents a share in the third quarter of 2006, vs. Wall Street expectations of 32 cents EPS. The company also pushed its gross margin up to 60.7%, compared with 52.7% in the year ago period, thanks to its increasing focus on high-priced analog chips, and improvements in manufacturing volume and efficiencies. But with the company having achieved its previously set gross margin target of 60%, some investors may have felt National's growth story has run its course. Shares of National closed down 85 cents, off 3%, to $27.18. In a conference call with analysts following the announcement, CEO Brian Halla said the company was fully capable of achieving further gross margin gains by continuing to focus on analog products and by growing the top line. Halla declined to provide new margin targets at this time, promising to unveil the company's new business model at the end of the quarter. "Check back at the end of this quarter to find out where we think we can go for here," said Halla. National's strong financial results come in the wake of a couple of semiconductor updates which left investors less than enthused. On Friday, Intel ( INTC) warned Wall Street that sales in the current quarter would be less than it had initially projected. Texas Instruments ( TXN) announced Monday that it was bumping up the low-end of its profit range for the current quarter, and tightening its sales forecast. But while strong, the new guidance was not as high as some investors had hoped, prompting TI's stock to lose ground.