Reporting its fiscal fourth-quarter earnings today,Micron Technology Inc. warned investors that it’s planning to take drastic measures by scaling back on plans to build out production capacity amid what it called an “unprecedented” market downturn.

In a press release the company reported a net profit for the fourth quarter of $1.49 billion, with earnings before certain costs such as stock compensation coming to $1.45 per share. Revenue for the period came to $6.64 billion, down from $8.27 billion one year earlier. The results were mixed, with Wall Street analysts looking for lower earnings of $1.37 per share on higher revenue of $6.73 billion.

ernst 64b q1levycnbc

Micron also reported its fiscal 2022 results, posting earnings of $8.35 per share on revenue of $30.76 billion, up from $27.71 billion in sales the previous year.

Micron President and Chief Executive Sanjay Mehrotra (pictured) pointed out that fiscal 2022 was the company’s sixth consecutive year of positive free cash flow, something that helped it deliver a record $2.9 billion to its shareholders.

50m capitalwheatleysiliconangle

Whether it’s able to do that again next year is up for debate, however, for Micron’s first-quarter forecast was about as miserable as it gets. The company said it’s anticipating earnings of anything from a six-cent-per-share loss to a 14-cent-per-share profit, with revenue of between $4 billion and $4.5 billion. That contrasts with Wall Street’s forecast of a 69-cent-per-share profit on sales of $5.71 billion.

Micron specializes in dynamic random-access memory and NAND flash memory chips. DRAM is the kind of memory that’s commonly used in personal computers and servers, while NAND is the flash memory that’s found in smaller devices such as smartphones and USB drives.

young 64b q1levycnbc

In a conference call, Mehrotra said the DRAM industry has historically always been disciplined in terms of capital expenditure management and supply growth management. In line with that, the CEO announced that Micron will be taking drastic measures to ensure the health of its business. The plan calls for a 30% reduction in total capital spending, cutting back by about $8 billion overall. Its spending on wafer-fab equipment will be scaled back by 50%.

“We are taking decisive steps to reduce our supply growth including a nearly 50% wafer fab equipment capex cut versus last year, and we expect to emerge from this downcycle well positioned to capitalize on the long-term demand for memory and storage,” Mehrotra insisted.

Micron Chief Financial Officer Mark Murphy provided a little more detail about Micron’s problems, saying the company’s already high inventory backlog is expected to get even higher in the coming months. “[Inventory levels]… will be over 150 days, we believe. And again, it’s a function of this unprecedented period, and we’re doing what we can to affect future supply or future capacity, to be in a position to work those inventories down,” Murphy said. “They’re high-quality inventory so they will be usable. And we’re managing working capital expenses, cash flow, all of them aggressively at this time.”

us 64b q1levycnbc

Analysts told SiliconANGLE that Micron’s cutbacks on capital expenditure were a sensible move given the current market conditions.

“After the last couple of weeks of bad market and economic news, I doubt that investors were expecting a miracle from Micron,” said Charles King of Pund-IT Inc. “However, the company’s gloomy forecast adds additional weight to the general sense of pessimism we’re seeing in many tech vendors and markets, particularly those with high exposure to consumer products and spending habits. That said, what Micron is doing seems eminently sensible – battening down the hatches for what looks like ugly weather ahead. The company’s solid position and leadership suggests that they’ll successfully weather the storm.”

Holger Mueller of Constellation Research Inc. said he was similarly optimistic in the long term, with the recent quarter showing us that Micron is in safe hands with its executive leadership.

“Micron managed a very strong end to a record-breaking year, marking six years of cash flow positive performance,” Mueller said. “The headwinds are coming but this is characteristic of the semiconductor industry, so now it all comes back to Sanjay Mehrotra and team. They need to manage the company in difficult times as well as they did during easier times. Its reduced capital expenditure, combined with low general and administrative and sales and marketing costs will certainly help. Notably, the company has committed to putting triple the amount of its G&A and S&M costs into research and development, a move that should lead to innovations in the near future.”

It’s not immediately clear if Micron’s planned cutbacks on capital expenditure will have any impact on the company’s long-term investment plans, which call for the company to spend $40 billion on expanding its U.S. chip production capacity. Those plans include the construction of a new memory chip plant in Idaho, at a cost of about $15 billion, as well as expansions of its existing sites.

Despite the soft outlook, Micron’s stock barely moved in after-hours trading, though it did fall 2% earlier in the day on a down day for the overall market. The news may well have been expected given that Micron was one of the first major chipmakers to warn of a market downturn when it reported its third-quarter results in June.

Patrick Moorhead of Moor Insights & Strategy told SiliconANGLE that Wall Street wasn’t surprised because the company had already flagged global oversupply issues and the price pressure it’s inflicting on the industry. “Micron is a leader in the newer technologies like DDR5, and is a density leader in flash, so it will do just fine in the long term,” he said.

Micron’s stock is down more than 46% in the year to date, compared with a 24% drop in the S&P 500 and a 31% fall in the Nasdaq Composite Index.