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Qualcomm may take charge in 4Q

Bookeeping problems in a Russian venture to set up a wireless local loop have ricocheted off Leap Wireless and hit Qualcomm in the fourth quarter.

Qualcomm Inc. (Nasdaq: QCOM) said Thursday that Leap Wireless International (Nasdaq: LWIN)'s decision to withdraw support for a Russian venture in which they had a $50 million investment may result in a one-time charge in their fourth quarter. But, excluding charges, Qualcomm expects to exceed estimates for the quarter.

Qualcomm, which makes digital wireless communications products, closed at 187 3/4 Wednesday. Trading in Leap Wireless shares was jagged throughout the day and closed at 23 13/16. Leap Wireless is a wireless communications carrier that operates wireless networks in domestic and international markets.

Qualcomm said they are still evaluating the effects of Leap Wireless' decision to withdraw from its business with Russian company Metrosvyaz. Regardless of the expected one-time write down in the fourth fiscal quarter of 1999, Qualcomm said fourth quarter earnings, excluding non-recurring charges, will meet or exceed First Call's consensus estimates of 88 cents per share.

Qualcomm has already had problems easing investors ahead of its fourth quarter earnings results; the company also issued a reassuring statement on September 14.

Leap Wireless said Wednesday that it has ceased funding its loans to Metrosvyaz, a company that is attempting to establish joint ventures in Russia to operate a wireless local loop service. On beginning a detailed special audit of Metrosvyaz's books and contracts, Leap found serious financial irregularities, despite being denied full access to information, Leap said in a press release. Leap has initiated arbitration seeking a full accounting and damages from Metrosvyaz and one of its directors.

The company also announced it will have about $27.3 million in write-offs overall in connection with problems in Russian businesses in which it has stakes.

Through holding companies, Leap indirectly owns 35 percent of Metrosvyaz and 21 percent of the Transworld Companies. The Transworld Companies are a series of companies that have been seeking to establish a domestic long-distance business in Russia The Transworld Companies boards of directors have voted to liquidate those companies and distribute the assets to the shareholders. Leap expects the liquidation of the Transworld Companies and withdrawal of support for Metrosvyaz will result in write-offs of approximately $17.7 million and $9.6 million for Transworld and Metrosvyaz, respectively.