Marconi's

(MONI)

earnings confession last night is only the latest addition to a long list of confessions issued by corporations over the past month. But it is a significant one nonetheless.

Based in the U.K., Marconi is a big player in the global telecom business and the magnitude of the confession can't be missed. Even more importantly, the warning came awfully late in the game, and it suggests the European economy isn't holding up as well as some might have hoped.

The warning came almost a full week after the second quarter ended, and just ahead of reporting season, suggesting to some traders and strategists that companies are still recklessly unrealistic about their performance and that there may be many more dire warnings lurking in the shadows when earnings season itself begins. Companies usually get their earnings warnings out before the end of the quarter.

"Everyone else came out and warned in the past several weeks," said Richard Keim, market strategist at

Kensington Management Group

. "It makes investors wonder what other things are going to be coming out when earnings announcements start rolling in."

One of the seven largest makers of telecom equipment globally, Marconi said last night that its operating profits would be cut in half year-over-year to 8.5 pence a share in the year ended March 2002. The company also said it would have to lay off another 4,000 employees because of a global slowdown. Analysts were forecasting earnings for the year of about 17 pence a share, according to

Thomson Financial/First Call

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and had already slashed their estimates by a fifth over the past month.

Marconi also said that it expects to see some "signs of recovery" in the first half of 2002, casting further doubt over the hoped for fourth-quarter reacceleration in tech earnings.

Strategists were anticipating an end to earnings confession season this week. Indeed, the

Nasdaq was able to shrug off several warnings last week as investors bet they had heard the worst. Some said it was just the beginning of a summer rally that would be driven by some signs the economy will recover later this year from the

Federal Reserve's rate cutting and recent economic data.

Investors were also spooked by what Marconi's warning says about business in Europe. Wall Street has been

watching Europe warily as a global slowdown could botch the second-half recovery in the U.S. that experts are betting on. But many investors were hoping Europe would hold up better than the U.S., and help the U.S. get back on its feet.

"The U.S. was counting on Europe to fuel the next leg of its growth cycle," said Kent Engelke, capital markets strategist at

Anderson & Strudwick

. "Now that's clearly not going to happen."