Good day, everyone. Welcome to the eBay third quarter 2008 earnings results conference call. This call is being recorded. At this time, I would like to turn the conference over to Mark Rowen, VP of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone and thank you for joining us. Welcome to eBay's earnings release conference call for the third quarter of 2008. Joining me today on the call are John Donahoe, our President and Chief Executive Officer; and Bob Swan, our Chief Financial Officer. We are providing a slide presentation to accompany Bob’s commentary during the call. This conference call is also being broadcast on the Internet and both the presentation and the call are available through the investor relations section of the eBay website. Before we begin, I’d like to remind you that during the course of this conference call we will discuss some non-GAAP measures in talking about our company’s performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the slide presentation accompanying the conference call. In addition, management may make forward-looking statements relating to our future performance that are based on our current expectations, forecasts, and assumptions and involve risks and uncertainties, including those relating to the company’s ability to grow its businesses, user base, and user activity. Our actual results may differ materially from those discussed in this call for a variety of reasons, including but not limited to the impact of recent global economic events and the potential global economic downturn, foreign exchange rate fluctuations, changes in political business and economic conditions, our ability to profitably expand our business model to new types of merchandise and sellers, the impact and integration of recent and future acquisition, our increasing need to grow revenues from existing users in established markets, an increasingly competitive environment for our businesses, the complexity of managing a growing company with a broad range of businesses, our need to manage regulatory tax, IP and litigation risks, including risks specific to PayPal and the financial industry and risks specific to Skype's technology and to the VOIP industry, and our need to upgrade our technology and customer service infrastructure at reasonable cost while adding new features and maintaining site stability. You can find more information about the factors that could affect our operating results in our most recent annual report on our Form 10-K and our subsequent quarterly reports on Form 10-Q. You should not unduly rely on any forward-looking statements and we assume no obligation to update them. All information in the presentation is as of October 15, 2008 and we do not intend to -- and undertake no duty to update this presentation. And now, I will turn the call over to John.

Thanks, Mark. Good afternoon and welcome, everyone, to our Q3 earnings call. I’ll begin today by reviewing our financial performance and then provide an overview of our portfolio. And after a few closing thoughts, I will turn it over to Bob for more details on the quarter and on our outlook for the year. Our Q3 results were in line with our guidance for the top line and exceeded our guidance on the bottom line. Specifically, revenue was $2.1 billion, up 12% over last year. Non-GAAP EPS was $0.46, up 11%. We generated $543 million in free cash flow and our return on invested capital continued to improve at 28.8%. We ended the quarter with $3.3 billion in cash and cash equivalents on our balance sheet with $2.9 billion of this outside the U.S., and as we announced last week, we are strengthening our position in online payments and online classifieds through acquisitions and we proactively streamlined our organization by reducing our headcount by about 10%. Overall, we are pleased with the performance and strength of our company. We delivered strong results in what is a very challenging external environment, an external environment we expect to continue in fourth quarter and beyond. These are turbulent times for which no one has the perfect playbook. There is a high degree of economic uncertainty and turmoil in the financial markets and this is impacting consumer spending and e-commerce growth rates, and we are seeing an impact across all of our platforms. In this environment, we delivered a solid third quarter while also taking a number of steps to strengthen our company and better align our cost structure to invest and compete in the future. Challenging times create opportunities for companies that are prepared to lead and eBay has the global portfolio, the…

Thanks, John. Now I’ll review our financial performance in some detail and during my discussion, I’ll reference our earnings slide presentation which accompanies the webcast. Overall, our Q3 financial results were solid in an increasingly difficult environment. Revenue came in slightly below the midpoint of our guidance we provided in July while EPS came in significantly above our expectations. Revenue growth was up 12% year over year, non-GAAP earnings growth was up 11%, and we generated $543 million in free cash flow during the quarter. We continued to execute on our stock buy-back program, repurchasing $623 million worth of eBay shares. Additionally, last week we announced two acquisitions that are intended to strengthen our faster growing businesses and position us competitively for the future. We also announced actions to simplify our organization in order to streamline decision making and reduce our cost structure. This will result in a charge of approximately $70 million to $80 million, primarily in the fourth quarter and annualized savings of approximately $150 million. Our combined businesses generated net revenues of $2.1 billion in the third quarter, a 12% increase over last year. Organic revenue growth excluding acquisitions and FX was 9%. Overall revenue growth was enabled by high growth PayPal merchant services, classifieds, advertising, and Skype. Our revenue growth was negatively impacted throughout the quarter by the broader economic environment, as well as a strengthening U.S. dollar. We saw considerable slow down across virtually all our businesses beginning in mid-August. Non-GAAP EPS was $0.46 in Q3, an 11% increase over last year and $0.05 above the high-end of our guidance range. Adjusted for a one-time tax gain in the third quarter of 2007, EPS growth would have been 24%. The stronger-than-expected EPS performance was primarily driven by a lower tax rate and cost controls as…

(Operator Instructions) Our first question comes from James Mitchell with Goldman Sachs.

Thank you for taking my question. Your fourth quarter guidance seems to imply really no Christmas, which is kind of consistent with my expectations for my own lack of compensation but putting that to one side, do you see the economic cyclicality hurting the marketplace business or do you also see some impact on the PayPal business? And then on slide 18, I think, you referred to more marketing dollars as part of the reason for the earnings guidance revision for the fourth quarter. I think year-to-date, your marketing spend is sort of tracking flat to down. Do you see that turning around sharply in the fourth quarter? Thank you.

Thanks, James. First regarding economic cyclicality, you know, what we saw during the course of the second quarter, first I’ll kind of characterize external signs and then internally how it impacted our business. We saw a fairly sharp deceleration in retail sales, in vehicle sales during the course of the quarter. Merchant services, which has a pretty good visibility into what’s going on in e-commerce overall decelerated during the course of the third quarter. And then fourth, e-commerce growth rates -- here in the U.S., we don’t have as good outside the U.S. but here in the U.S. decelerated rather sharply Q2 to Q3. We felt the effects of that across all aspects of our business. While PayPal had a very strong quarter, it did suffer from decelerating growth rates really starting in the second and third week of August as it exited the third quarter. And we expect those dynamics to impact our business in the fourth quarter. In terms of the question on guidance and marketing spend, we have generated some improvements in our overall marketing spend during the course of the year. We were 400 basis points down in the third quarter; however, as you will remember, we are spending more on buyer retention kind of programs versus acquisition related programs, through couponing and loyalty programs. And those dollars are impacting revenue in terms of contra revenue as opposed to marketing and expense. We expect in the fourth quarter in this tougher economic environment that we will be spending even more marketing dollars as a percent of revenue than we did in the third quarter that will impact both contra revenue and our marketing -- our sales and marketing expense as a percent of total.

The way we are going to spend that is to really fight for our sellers. We envision a tough holiday season and we feel a strong need to get out there and help drive demand on behalf of our sellers, so we’ll increase Internet marketing, we’ll increase our couponing, we’ll increase our cash-back program with Microsoft, promotions, things that we have proven ability to generate returns from.

(Operator Instructions) Next we’ll hear from Youssef Squali from Jefferies. Youssef Squali - Jefferies & Company: Thank you very much. Okay, so my one question -- John, if I look at the sum of the parts for eBay, the stock certainly looks pretty cheap on that basis. The only issue is really kind of remains a theoretical exercise, unless management gives it serious consideration and is willing to act on it. Are you and how long would you wait before considering a potential restructuring of the business as the core continues to weaken? Thanks.

We are continuing to, as I said, invest in our areas of strength and we see strong synergies between the core eBay business and the PayPal business, and strong synergies between the eBay business and the other e-commerce formats. And I get a question frequently on PayPal of wouldn’t we be better off with PayPal being separate? Our sense is no, that actually there are strong synergies between PayPal and eBay, that eBay continues to provide PayPal with new customers, that there is still growth for PayPal left on eBay. As we said, we are delighted penetration grew more in the third quarter than it has any quarter in the past. It’s now at 60% globally. We think that can go higher. And there’s nothing about being part of our portfolio that is holding PayPal back -- in fact, quite the contrary; being part of the overall portfolio allows us to move on an acquisition and opportunity like Bill Me Later. So we are focused on trying to take advantage of the synergies. We don’t think we’ve fully realized the synergies between eBay and PayPal and that our classifieds business, advertising, and Stub Hub all have strong synergies with eBay. The one question on Skype -- Skype I think is a great standalone business. Obviously the more we let it stand alone, the more it seems to deliver fantastic results. Right now it’s not a distraction and we are focusing our attention on eBay and PayPal and the e-commerce businesses and so we will continue to assess its role in the portfolio but right now, it’s not a distraction and it’s delivering good results.

Our next question comes from Christa Quarles with Thomas Weisel Partners.

Just following up on the PayPal slowdown, it looks like international in particular fell off fairly significantly in the quarter. I was wondering if you could give us some deeper insights in there in terms of which markets you are seeing strengthen, if that’s really reflective of what’s going on with the broader e-commerce market in those areas. And then also if you could just update us on your G-market intentions -- the filing suggests that you are intending to get more than 50% of G-market and so I was just wondering if you could follow-up on that. Thanks.

First on the PayPal slowdown, yeah, we saw some deceleration or more deceleration I should say outside the U.S., a function of a couple of things -- one, Q2 to Q3 currency. So with the stronger dollar, clearly international revenues are translating at a tougher rate. Two, the on-eBay business decelerated Q2 to Q3, along with the GMV deceleration. And then third, our global merchant services business, we saw some deceleration Q2 to Q3 both here in the U.S. and outside of the U.S. In terms of G-market, let me -- maybe let me put our -- reiterate our M&A philosophy and focus and then maybe put Korea into context. First we’ve said that we are going to continue to maintain the flexibility to invest and grow our businesses through acquisition and we’ve highlighted three specific areas of focus -- one, geographic strengthening; two, adjacencies that leverage and strengthen our core businesses; and three, technologies that enable and strengthen our core businesses. That’s the three areas that we’ve been in focus on over the last three years and that’s resulted in acquisitions like Stub Hub, which we feel great about; more recently, Fraud Sciences, which is a technology that enables PayPal. And then recently, Bill Me Later and DBA or classifieds, kind of extensions of our core business. So that’s been our M&A strategy for the last several years. In terms of Korea, we’ve got a great business in Korea. Our IAC business has been performing very well over the last couple of quarters and we continue to focus on competing and growing in that market. Along the lines, we in conjunction with G-market had filed with the Korean regulators to assess whether it would even be possible to take an equity stake in G-market and recently got a favorable ruling in that regard. And I think we’ll evaluate on an ongoing basis whether that makes sense in terms of the best uses of how we allocate capital in a disciplined way.

Let me just come back and make one comment, Bob, on your first -- while there was a deceleration in the market and outside the U.S., PayPal's international business was one of the things I think we are very excited about. We continue to see merchants adopting PayPal in Asia, across Europe, and even in Latin America and other places where we don’t have a strong eBay presence because it’s driving incremental growth and it’s opening up a worldwide, a global marketplace for those merchants. In fact, TPV outside the U.S. was up 37% for the quarter and the merchant services international growth was close to 50%. So the economy is impacting I think the whole world but the core value proposition PayPal delivers to merchants around the world as a global payment platform is one that we continue to think is quite powerful and merchants are responding to.

Our next question comes from Mark Mahaney with Citigroup.

John, I wanted to ask you a question about the timing or the speed at which you think it’s optimal to try to remove sub-par sellers off the network. Are there still levers you have there to accelerate that? And how do you balance not trying to be too disruptive to the seller community with trying to limit the length of duration in which buyers on the site can still have sub-par experiences? Thank you.

Thanks, Mark, that’s a great question and one that we spend literally hours each day on. Here’s how we are trying to do it -- the first thing is we are not assessing sub-par sellers. We’re letting our buyers do it and so these detailed seller ratings where buyers are rating our sellers, that’s the foundation we are using and so I think that’s a very important principal here, where we are creating a marketplace that allows transparency. And as I mentioned earlier, what’s interesting is when you lay out our highest rated sellers -- that is sellers that have 4.8 and above and then look at sellers 4.6 to 8, 4.4 to 6, 4.4 and below, you see growth rates now increasingly very consistent with those where buyers are increasingly buying from the highest rated sellers and buying less -- in fact, they have stopped buying from lower rated sellers. And so that tells us the eBay marketplace is getting safer. Now, I think some would say we should be moving faster and even more aggressively on that. I think our sellers would say we are probably moving too fast and too aggressive. We are trying to strike that balance where a long-term seller has the opportunity to improve their service on eBay and improve their ratings from buyers but we see clear evidence that the site today is safer and easier to use than it was six months ago. You know, we put these changes in in March -- it’s safer today. Buyers are telling us that in their qualitative data and what’s yet to happen is have that convert into more purchases.

Our next question comes from Brian Pitz with Banc of America.

Thanks. Would you discuss where you expect the take rates for marketplace to go? Do you expect to be really just more than a modest impact at this point? And any color you can give us on expected exchange rates that are baked into your guidance? Thanks.

Let me take the take rate point and then Bob will take the exchange rate -- our goal with our pricing changes this year was to modestly reduce our take rate. We are obviously significantly rebalancing our fees to reduce the up-front fees and put more -- align our success with that of our sellers and the net effect of what we expect in a conversion neutral environment is the take rate will come down modestly over time. We’ve also gone to category-based pricing because margins for sellers differ significantly by category. So conversion impacted on the short-term but the general direction we are trying to do is to ensure that our marketplace is the most competitive marketplace for sellers to sell on.

Just one other observation on that, Brian, is in the quarter, our take rate actually went up, which is a function of modestly lower take rates but also the mix of our business. So our highest take rate business, Stub Hub, continues to demonstrate great growth and our lowest take rate business, Vehicles, has really been suffering by the overall economic environment. So those are two kind of degradations about the overall take rate that’s reflected in Q3’s results. In terms of exchange rates, I would -- we try to stay away from giving specific rates but what I would say is 90 days ago when we spoke to you and we were looking at a Euro that was about $1.58 to the dollar and a pound that was about $1.98 to the dollar. And today, reflected in our guidance for the rest of the year, it’s closer to a spot rate that’s about $1.36, $1.37 and a pound that’s about $1.78 to $1.77 to the dollar, so what’s transpired over the course of the last three months is about a 10% strengthening of the dollar and that will impact our revenues from the last time we spoke to you by about $200 million.

Our next question comes from Jeffrey Lindsay with Sanford Bernstein.

Just following on from that, could you give us any sense of -- are you going to be taking any hedging initiatives, or do you have any in place to offset the risk of this dollar appreciation? And then can you give us any color on the quality of receivables in the Bill Me Later acquisition and your expectation for net charge-offs? Do you think they are going to stay at the current 3.4% rate? Thank you.

First in terms of hedges, for the most part our hedging strategies are entered into at the beginning of the quarter for the next 90 days, for the most part. So we are exposed in terms of translation of revenues within the quarter. However, we hedge our exposures in terms of income within a range in the 90-day period, so we get pretty protective within the 90-day period but not very protective overall beyond 90 days. In terms of Bill Me Later’s receivable portfolio, we indicated last week that our expectation was that the receivable portfolio would be about $550 million, give or take when we closed the transaction later on in the quarter. And when we assess the portfolio, we try to take into account both historical trend rates, what we were seeing on recent approval rates and charge-offs, and a view on a go-forward basis about what we could expect the current economy and the future would be on the portfolio. And with that, we tried to as best we could take that into account in giving you the $550 million loan portfolio balance.

Our next question comes from Imran Khan with J.P. Morgan.

Thank you for taking my questions. The question is if I look at your listing growth rate the last three quarters and look at your conversion rate, it seems like there is an inverse relationship, so trying to understand this 18% conversion decline, how can you turn that around? You talked about best match -- I think you rolled it out in Italy. Give us some color -- when should we expect to see that in the U.S.? And do you expect the conversion to continue to decline? If so, for how long? Thank you.

Let me address that -- the conversion rate is actually transitioning as we talk because the recent changes we’ve made are changing the nature of fixed price listings where now instead of a seven-day listing, sellers are getting a 30-day listing goods to cancels. And so what I think we will see is a site that has more listings but those fixed price listings will only get exposure when the sellers offer the best prices and the highest service. So we are going to spend less time on conversion and more time on sold items, and what in essence is happening is our search or our finding platform is changing how we bring value to the top of the search results. Auctions will continue to time ending soonest, which is the best way to bring the best values to a buyer in an auction format for auction listings. And then for fixed price listings, the change we are making in Q4 is that instead of time ending soonest being what is bringing the fixed price listings to the top of the list, we will find the lowest price, highest quality seller fit with that particular search term or bring that to the top of the list. So conversion rates will probably still remain relatively lower because of the increased fixed price listings but successful items, that is sold items, is really the metric we will be focusing on. As Bob mentioned, that’s down four points in Q3, we think largely driven by the economy and it’s a metric we are very much focusing on, both to assess how findings are going as well as how our site is going in Q4 and beyond.

The only other thing I would add is a better consumer spending environment, all else equal, will also impact conversion so that clearly is one that we believe is impacting growth of sold items.

Our next question comes from David Joseph with Morgan Stanley.

I think I am going to ask the first question a little bit differently, and you might have just addressed this a little bit but your fourth quarter guidance implies a decline in revenue of about 4% at the midpoint of your year versus 11% growth implied in the prior guidance. And given that you reiterated guidance in the beginning of September, it sounds like there was significant weakness in September, which is in line with what we’ve been hearing in retail across the board but wondering if you could tell us, talk to us a little bit about the linearity and what you’ve even seen in October. And then just assuming that GMV declines again in the fourth quarter, maybe you could give us a sense of what we should expect for 2009 -- should we just start modeling a decline in GMV in 2009 as well?

In terms of kind of sequential growth rate, Q3 grew by 12% in our implied guidance and Q4 has us at about minus 4%. And I would characterize maybe three things primarily that are impacting that -- one is clearly the third quarter was impacted by a strengthening dollar and a weaker economy but in the latter part of the quarter. So as the dollar strengthened quite a bit towards the end of the quarter and we had the full effect in the fourth quarter, the economy weakened quite a bit in mid-August and for the rest of the quarter and the combination of those two things are making the growth deceleration or growth from Q3 to Q4 that much tougher. The third thing I would add is, as John indicated, we are going to in a tough consumer spending environment, we are going to be spending more on sales and marketing, particularly in coupon related expenditures. And that will impact the revenue growth as well. And I think I would like to say I wish there was a lot more clarity in -- at last in my crystal ball on what’s going to transpire over the critical holiday season for us but honestly, there’s not and as a result, as you can tell by our guidance, the range that we gave you in the quarter is a lot wider than it normally is at this time just because -- just a reflection of -- you know, just the uncertainties we see in the consumer spending environment.

Operator, we have time for one last question.

Our last question comes from Scott Devitt with Stifel Nicolaus.

Thank you. I guess at today’s close, your market cap is above $20 billion and you have about $3.6 billion of cash and short-term investments, and the company spent $5.3 billion in buy-backs over the past couple of years at about $30 a share. With your free cash you are going to generate in 2008 and an S&P like dividend payout, you could have a 4% or 5% dividend yield. So I was just wondering if there was any change in the company’s perspective in terms of returning capital to shareholders via the existing buy-back versus a dividend in the future. Thanks.

Thanks, Scott. You know, we end the quarter, you’re right, with $3.3 billion in cash. As you know, the reality of that cash is about $400 million sits here in the U.S. and the rest of it off-shore, so the inherent flexibility we have to use our strong balance sheet and our strong cash flows here domestically has a pretty severe tax rate penalty associated with it. So that’s a constraint that we have to deal with. Secondly, you also realize that with the acquisition of Bill Me Later and the relatively low cash position we have here in the U.S., as we will be using both our cash and available financing, including our line of credit to finance that transaction and in a sense we’ll have borrowings here in the U.S. post the completion the completion of that transaction. And then third, and from a more macro perspective, I would say we always look at our inherent capital structure and the best way to maintain our financial flexibility to invest and grow while redeploying our capital to shareholders, and we’ll continue to do that.

Okay, thank you for joining us and we’ll see you in 90 days.

That does conclude today’s conference. We do thank you for your participation. Have a great day.