Summary: ST Microelectronics N.V. (STM), one of the top five global semiconductor companies, has been beset by troubles including flat sales, a struggle to cut costs, removing itself from the low-margin memory chip business, and competition from strong rivals like Texas Instruments Inc. (TXN) and Qualcomm Inc. (QCOM). Yet its 23x P/E multiple is double that of TI -- and Technology Trader Bill Alpert "doesn't get it." While its true that margins are up (2.7% in 2005 to 6.9% in 2006), and so is free cash flow (3% to 7.5% of sales), and EPS more than doubled to $0.83 -- sequential sales are down since June 2006, and the company forecasts a further 3-11% drop in the current quarter. Bulls expect a sharp rebound in the second half of the year, but most of ST's cell chips are geared towards yet unpopular 3G phones, and it's the humble 2G products that continue to fuel sales growth. Its imaging chips face competition from hefty rival Micron Technology Inc. (MU). ST plans to enter the Bluetooth chip market this year, but there too it's up against tough rivalry from the likes of Britain's CSR, Broadcom Corp. (BRCM), and Atheros Communications Inc. (ATHR). Alpert speculates that ST's hefty price tag is a result of speculation it may be a buyout candidate, which is always possible, but with ST's challenges, unlikely.