Good day, everyone. Welcome to eBay's fourth quarter and year end 2008 earnings results conference call. (Operator Instructions). At this time I would like to turn the conference over to Mark Rowen, VP of Investor Relations. Please, go ahead, sir.

Thank you, operator. Good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the fourth quarter and full year of 2008. Joining me on today's 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 call, are available through the Investor Relations section of the eBay website at investor.eBay.com. Before we begin, I'd like to remind you that during the course of this conference call we'll discuss some non-GAAP measures in talking about our company's performance. You can find the reconciliation of, those measure 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 business, 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 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 acquisitions, 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 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 available at investor.eBay.com. 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 January 21, 2009, and we do not intend and undertake any duty to update this presentation. And now I'll turn the call over to John.

Thank you, Mark. Good afternoon, everyone. Welcome to our Q4 earnings call. Today I'll talk about our results from both the Q4 and annual perspective. I'll then outline our key priorities for the coming year, before turning it over to Bob, for more details on the quarter and our Q1 '09 outlook. Let's start with a quick look at our Q4 results. Clearly, we've been operating in an almost unprecedented external environment. You are all aware of the news that we've been reading. This is an extremely difficult holiday season where consumer spending dropped dramatically, while retail sales experienced the biggest decline in decades and even e-commerce saw negative growth for the first time. There is no doubt that eBay was impacted by the macro economy, and our fourth quarter results reflect this. Our revenue for the quarter was down about 7% to just over $2 billion, non-GAAP EPS was down about 9% to $0.41. This is eBay's first negative year-over-year quarter. We are not happy about that, however, our Q4 revenue is within the quarterly guidance we set and our EPS is at the high-end. We knew the holiday season would be extremely challenging and we managed our business with a prudent mix of operating discipline and competitiveness. We fought for our sellers and buyers. Our focus was helping our sellers compete in a brutal competitive environment and offered great deals for buyers on eBay, while continuing to grow PayPal, and the rest of our portfolio, faster than e-commerce and we achieved these goals. Let me provide a couple of examples. On eBay, our highest rated sellers, those rated 4A and above, grew their businesses 17% in the fourth quarter, once again demonstrating that sellers who deliver the best deal and a great shopping experience are growing their businesses…

Thanks, John. First I'll review our Q4 and full year 2008 financial performance in some detail, and then I'll discuss guidance for the first quarter of 2009. During my discussion I'll reference our earnings slides presentation that accompanies the webcast. All growth rates mentioned in my prepared remarks represent year-over-year comparisons, unless I clarify otherwise. Overall, our revenue was down 7%, non-GAAP earnings were down 9%, and we generated $525 million in free cash flow during the quarter. Q4 financial results were impacted by a difficult economic environment coupled with a strengthening US dollar. Through belt tightening, we were able to deliver at the high end of our EPS guidance range despite the fact that revenue came in at the low end. 2008 overall was a good year financially; strong revenue growth, stronger EPS growth and excellent free cash flow. We had a strong first half with revenue and EPS up 22% and 25% respectively, but the second half proved to be extremely challenging as global ecommerce slowed, the dollar strengthened considerably, and interest rates declined. Let's take a closer look at our Q4 results. Our combined businesses generated net revenues of $2 billion in the fourth quarter, a 7% decrease. Organic revenue, excluding acquisitions and foreign exchange was down 3%, and couponings spending reduced revenue growth by an additional three points. Revenue was negatively impacted throughout the quarter by weakness in the economy as well as a much stronger US dollar. Despite the tough economic environment, PayPal Merchant Services, Classifieds, advertising and Skype delivered strong growth. Non-GAAP EPS was $0.41 in the quarter, a 9% decrease. Excluding the impact of the strengthening dollar, our EPS increased 7%. Tight cost controls offset the impact of lower volume and higher coupon expense. Our operating margins for the quarter were 32.8%. We…

(Operator Instructions). We will hear first from Doug Anmuth of Barclays Capital.

Great, thank you for taking my question. A couple of things; first, I was hoping that you could give some color on conversion rates and ASPs in terms of, I assume, the declines there, as you have in previous quarters. And then, secondly, can you comment on the increased emphasis that you guys have put recently on larger merchants and, in particular, the Buy.com relationship and how other similar ones have gone so far. Do you expect the platform to continue to move in this direction and what does this mean; overtime for some of the smaller sellers on eBay? Thank you.

Hey, Doug, let me tackle the first one and then have John address the second one. What we indicated for the quarter is our sold items grew by about 3%, and that's a function of the equation you've seen throughout the year, with strong listings growth, but having an impact on conversion rates. So conversion rates did come down. GMV and our core business, excluding vehicles, were down 4%, excluding the affect of currencies. The difference is a seven point decline in ASPs during the quarter, as we saw consumers continue to trade down and, also, we continue to serve up the great deals on eBay, in a more effective and efficient manner, with our new search platform.

And Doug, on your second question on the larger merchants; here's how we do it. Let me just say right up front, we are still committed to individual and small business sellers. So, that us creating opportunity for them to sell on eBay, is as true today as it was five years ago. That said, what sellers have been telling us for years, the most successful sellers that have been scaling their businesses, say that eBay is a very hard platform to scale on and at some point they reach a point where the way we operate is challenging for them, and so, we are evolving our platform to make it easier for larger merchants to upload higher volumes of inventory on eBay, and we are also trying to make it easier to move deep volume on eBay. One of the encouraging things that we saw in the fourth quarter was, you may have seen, our deal of the day promotions and we had several examples where sellers came in and said we are going to offer an extraordinary deal on a given item, and we had sellers that were moving 5,000, 6,000, 7,000 items within a 24-hour period of time. So we don't view it as either-or; our ambition is to have the most diverse selection and the most flexible platform so that both small sellers and large sellers can compete and drive good values and deals for our buyers.

Operator, we'll take the next question, and if we could ask the callers to limit themselves to one question, so more people get a chance to ask questions, we'd appreciate it.

Thank you and we'll move next to Scott Devitt with Stifel Nicolaus.

I'll limit it to one. In reference to Skype, in the slide you noted that the revenue accelerated by 500 basis points on an organic basis and so now, it's on a run rate of north of $600 million in revenue and segment margins of above $120 million. So, I was wondering if you could just update us on your thoughts or plans in terms of creating shareholder value with Skype. Thanks.

Thanks Scott. I said from the beginning, I think I said it a year ago, Skype is a great standalone business and that I was uncertain of the synergies between Skype and the other parts of our portfolio, and certainly today, I still think it's a great stand alone business. And as you referenced, I think we've done a great job on really strengthening this business this year. I think Josh Silverman and his team, who I put in during March or April, have had a very positive impact on this business. Skype-to-Skype minutes last Q4 were growing at 26%, today they are growing at 72%, primarily because more and more users are adopting this product in tough economic times; a free product has a lot of traction. SkypeOut minutes have gone from 7% last Q4 to 61% growth this Q4, and that said, it's a $600 million run rate with 20% margin. So, there is no doubt this is a great standalone business that's getting stronger. I think we are now confident that the synergies between Skype and the other parts of our portfolio are minimal. So, we are going to continue to run and operate the business. It's not a distraction currently and at such time when we have further announcement to that, we'll let you know, but for now, we are very pleased with the momentum of the business and it's not a distraction.

Thank you. Next question please.

Our next question will come from James Mitchell with Goldman Sachs. Mr. Mitchell, your line is open. You may be on mute. Hearing no response we'll move to our next question, Mark Mahaney with Citi.

Great, thanks. I wanted to ask about product development priorities on the Marketplace side. John, you've done a lot of changes, or eBay has done a lot of changes, both for targeting buyers and sellers. If you think about 2009, could you just tick off what you would now view as the top three priorities, in terms of improvements, you want to make? Thank you.

Sure, Mark. Thanks. So, I'm pleased with the progress we made in 2008. I'm frustrated it hasn't yet translated into enhanced revenue and GMV growth, but, at the beginning of the year we laid out three priorities, and let me just comment on each. I said that eBay's competitive position hasn't kept up and that we needed to focus first on safety or trust. And so a year ago, we had no incentives for sellers to provide a safe and good service experience. Today, we have DSRs and sellers discounts tied to DSRs, and there is evidence that it's clearly a safer place to shop, as evidenced by the high growth rates of high DSR sellers, but we still have more room to go. I said we want to make it easier. A year ago, we fully had pictures on two-thirds of the listings on eBay and today Gallery is an example with over 95%. But, we still need to make it easier. And then, on value and selection, this is the one we made the most fundamental or structural changes to. A year ago you'll remember, we were still using a fundamentally auctioned approach to both auctions and fixed priced in eBay. So, we treated all this things as the same, Time Ending Soonest was our search approach on all listings and we priced, both fixed price and auctions, exactly the same across all categories. And 12 short months later, we've rebalanced pricing overall, of both auctions and fixed price, and then we fundamentally changed how we approached fixed price, so that we can now optimize auctions and fixed price. Namely, we cut fixed price insertion fees to almost zero. We made them category based and we've gone in Q4 to popularity sort for fixed price item. So, I…

Thank you, John.

Next question, please.

And next we will move to Steve Weinstein with Pacific Crest.

Thank you. So, as you mentioned, you shifted some of your promotional strategy more towards couponing and trying to drive repeat purchases. I'm wondering what we should expect here for Q1 and the rest of 2009, or are you going to shift the balance back towards a more traditional kind of marketing and advertising type of methods?

Steve, I feel like we made good progress in 2008. And frankly, given our penetration and scale in our more mature market, the competitive gain going forward, is not going to be adding the incremental new user. It's going to be, can we translate the strong user base we've got and large number of users and grow our share of wallet. And so, as you highlighted, we fairly significantly shifted our marketing mix in '08 more towards loyalty based and frequency based marketing. I think we learned a lot on couponing and on loyalty. Frankly, that helped us fight for our sellers in Q4. It was more a competitive fight against the discounts off on what we are providing. And I think, Q1 and the rest of '09 will continue to build on that. And it's interesting, I'm pleased that you see our active user growth with 5%, I wish that were higher, but that's some indication that activation rates are going up a little. Our sold item growth was 3%, I wish it were higher but it's higher than e-commerce growth rates and so we are going to continue to try to drive more frequency with our buyers and get them to shop more and more cross category. And I think we are just building our muscles, really, in those areas and will continue to build on the progress of '08 and drive it hard in '09 in what will be a very challenging competitive environment.

Thank you, that's helpful.

And Steve, the only thing I would add is, while strategically we will continue to do this, I think in '08, the year-over-year impact was fairly significant, because, we hadn't done that kind of loyalty retention based marketing in 2007. As we think about 2009, the year-over-year impact, we don't imagine, will be like it was in 2008, obviously, as we get to a more normalized level.

Let me just add one more thing to build on. Our IM efforts, we didn't talk a lot about in '08 our Internet Marketing efforts, but we continued to be, I believe, the largest purchaser of key words and continue to achieve efficiencies and productivity in our effectiveness, both to generate new users through IM, but also to generate repeat usage. So, I think we continue to be the best in the world at that.

Next question, please.

Next we will hear from Jeffrey Lindsay with Sanford Bernstein.

Thank you for taking my question. It looks like the Bill Me Later net charge-off rate is going up. Could I ask how the company managed BML? And will the net charge-off ratio be allowed to rise above the credit card industry average going forward? And, just a point of qualification, is BML offered oversees? Thank you.

Let me take the second one first; on overseas, no, it's not offered. The ambitions of the PayPal and the Bill Be Later team are to take that functionality and competency overseas, but that's not where we are today. In terms of the net charge-offs, it did grow, what we don't know about the net charge-offs on a competitive basis is, how the others will come in when they report their Q4 results. So, we're not exactly sure how we rack and stack vis-à-vis the competition. But ours did trend up as we expected. What the team has done is they have tightened their credit decisioning model through the course of Q3 and Q4 to mitigate the impact of potential of higher losses. And that's their secret sauce and that's what they are great at. They have great risk management processes to ensure that in issuing transactional credit as opposed to a line of credit; with transactional credit, they can manage risk in a much more effective way than the rest of the industry. In terms of the net charge-offs itself, a couple of things different about the Bill Me Later model vis-à-vis the industry. And that is, their customer balance tends to turn more frequently and therefore their denominator isn't nearly as high. Therefore, all else equal, net charge-offs has a tendency to be a bit higher than industry. Secondly, in terms of balance transfers that the industry benefits from when they get somebody to switch credit card usage, is in the denominator of the competitive landscape and that's not a function of the BML model. So, all else equal, we expect that rate to be a little bit higher than the industry, just in terms of how it's measured. Our team continues to manage that very effectively with their credit decisioning model.

Next question, please, operator.

Our next question will come from Christa Quarles from Thomas Weisel.

Hi, I was curious about your hiring of Chris Payne. One of our views is that, in part of the issue on the site, it's just really a search problem, and I was wondering if you could highlight any specific product development that you expect to come out of that. And then just one quick housekeeping item, I was wondering if you could give us vehicle sales on a domestic and international split? Thanks.

So, thanks Christa. As you highlighted, for those that don't know, we bought a small search company in December and Chris Payne is the founder. We picked up Chris and a handful of other topnotch search engineers that not only have a deep background in search, but also brought some technologies we think would really help enhance our search capabilities. So, we are very excited about them joining our team, and we think they will help us accelerate our progress in search. And the way I feel of our step back on search, one of the real opportunities we have, is we have the close transaction data that no one else has online and, between eBay and PayPal, that's a real potential advantage. Frankly, 18 months ago we weren't even collecting that data, that close transaction data, and no way could we use it in search. So, I feel like search is stronger today than it was a year ago, and it will be stronger, a lot stronger a year from now than it is today. And our current search team I think, enhanced by Chris and his team, are going to make good progress. Again, in '08, it was kind of a year of some heavy lifting and fundamentals. We launched a new search platform; we went to Best Match Search for the first time. So for the first time we incorporated seller quality in search results. We improved the search and recall ability. We went to popularity or relevant space search in Q4 in fixed price, but we are learning. And I think in '09 we will build on those fundamentals, and I think it is, absolutely we have an opportunity to continue to improve the search experience on eBay. It's a journey that will probably never end, but it's one, that I think you'll see some real nice progress in '09.

Chris as it relates to the vehicles question, just probably worth just highlighting. We made a change in kind of how we disclose GMV for you this quarter, where we gave you GMV without vehicles on its own and GMV vehicles. And the reason we did that is because they are such different businesses. And the way we manage things and the way we'll present you on a go-forward basis is GMV x vehicles and GMV with vehicles. Secondly as it relates to vehicles itself, GMV was down about 30% in the quarter. On an FX neutral basis it was down about 24%. Revenues performed better than GMV on a global basis because we continue to monetize that platform in different ways and GMV becomes increasingly less relevant. We do not plan on breaking out global vehicles by geography, by US and international, so, you're going to have to use your historical relationships to try to get that split, if that's important for you.

Okay, thanks.

Next question please, operator.

(Operator Instructions) We will hear next from Ben Schachter with UBS.

Given the uncertainty around the macro and your comments on cost controls, can you just help us understand what your internal target operating margins are for '09, and any change to any of the long-term operating margin targets among the various businesses. Thanks.

I'll tell you what we are trying to do to manage the business in this rather volatile environment, and I'll do it in the context of our first quarter guidance. So bear with me a second, because, I think it's important to kind of explain. While we couldn't provide full clarity for outlook for the year maybe explain how we are running the business. Last year's first quarter, we generated $0.42 of earnings per share, and I highlighted the three areas. How FX, how interest rates and how the acquisitions that we did are going to impact EPS in the first quarter of this year, which is a minus $0.11. So, we kind of started on January 1st with $0.31 of earnings and we are going to grow earnings to $0.33 in the quarter. And how we are going to do that in a fairly cloudy economic environment is - focus intently on the things that we can control, and the relationship we are trying to drive; is to make sure that our cost control and productivity that we generate more than offsets the impact of declines in volume and the change in mix in our business. That relationship, net-net, will generate a few pennies of EPS this quarter, best we can tell based on the range of volume that we guided to. That's how we'll manage the business through the course of the year. It's not necessarily targeting an operating margin rate for the company nor is it necessarily targeting operating margin rates by business unit. I will say that the implications of FX on our business will have an impact on our operating margin rates in the first quarter and we expect to have an impact on the full year.

Next question please.

Our next question will come from Justin Post with Merrill Lynch.

Thank you. It looks like you've taken a lot of initiatives to really improve the seller profile which will, presumably, help the buyers have better experiences. So I'm just wondering what you're thinking, as if you have more and larger sellers and reduce the number of total sellers, what that could do for long-term take rates and how you see that affecting your margins or do you really think that will have no net long-term effect. Just what your thoughts are as the seller mix changes?

Well, the first thing I'd say, Justin, is we have no, I would say, stated goals to shift our seller mix. As I said earlier, we think we've made it too difficult for larger sellers to sell on eBay historically. We're trying to make it easier. But at the end of the day, we are trying to create an opportunity where all sellers can compete for buyers business, and offer the best deal and the best service, and there are many examples where some of the absolute best deals on eBay and the best service come from smaller sellers. So I want to be clear on that. With respect to the impact on margin, I don't think we see any fundamental shift in margin. We have shifted our pricing in '08 to where we are somewhat indifferent between format, auction and fixed price, stores and core. And we have begun moving toward category based pricing. So, I think we are making some of the fundamental changes that allow sellers to compete and win on eBay. Anything you can add to that, Bob?

Justin, the only thing that I would say is, as a marketplace manager where we don't control the whole end-to-end experience and we don't have warehouses and we don't have inventory, we try to use incentives to ensure that sellers or particularly PowerSellers are creating a great experience for buyers, and from that, we believe, we can accelerate velocity of trade on the site. To the extent that the PowerSellers continue to dramatically improve their service levels over the long haul, we would expect to provide higher PowerSellers discounts which impact our take rate. And we believe that that is a great trade-off to make to continue to provide great service for buyers where PowerSeller discounts are a little bit higher, experiences of buyers is just that much better, and as a result, while take rate may be lower, velocity of trade on the site is higher. So, I think that over the long haul, that would be a lower take rate that we would feel great about because the experience we are providing is just that much better.

Great. Thank you.

Next question please, operator.

Our next question comes from Youssef Squali with Jefferies & Company. Youssef Squali - Jefferies & Company: Thank you very much. John, I want to go back to something you said earlier, something to the effect that, your portfolio of assets is not fairly credited in the value of the company. I guess an issue with that statement is that some of the parts kind of remain a theoretical exercise until investors feel that you are potentially serious about doing something in that vein. So, considering the trend of your depiction for '09, is there a point where a more drastic measure, I'm not talking necessarily just about a spinoff with PayPal, but, just a recap of the whole business, I mean, the alternative formats business is doing great. PayPal seems to be doing very well. The core business seems to be now maturing. Is there a point where a recap kind of becomes to be a “must” if shareholders are to make money in the stock?

Thanks for the question because I know it's on a lot of people's mind. Look, here's how we are thinking about it. We have a great portfolio, and I completely would agree, as I said earlier, we are not getting credit for it, and believe me, Bob and I regularly look at our portfolio with objectivity. Here's what we see. We are continuing to drive success in our business in each of these units as well as trying to drive synergies and we still see strong synergies between eBay and PayPal. In particular, we see the synergies around eBay provide new users to PayPal, in essence, for free, and that continues to be the case. That's still about half of PayPal's new users. Penetration on eBay is still only 63%. Now, if we had a greater reign and penetration in '08, based on eBay, then we had in the last five years, that's not a coincidence. We drove that penetration hard and we anticipate similar gains in '09, and that's real synergy, and frankly, PayPal is helping make eBay safer in a more effective marketplace. Perhaps as, or more importantly, being part of eBay does not constrain PayPal's growth. Quite the opposite, our acquisition of Bill Me Later is a great example of where we leveraged eBay's balance sheet to make a strategic acquisition or an acquisition that is quite strategic to PayPal. So, our intent is to continue to drive these synergies and continue to realize value from them. If and when those synergies run their course, we would reevaluate it then, but, I think for now, we feel quite good about those synergies and obviously the synergies between the alternative ecommerce formats in eBay and PayPal continue to be strong.

Operator, we have time for one last question.

Thank you. We'll move to Imran Khan with JPMorgan.

Yes, hi. Thank you for taking my question. The question is for John. John, if you look at your fixed price, as a percentage of GMV, improved 300 basis points, implying that your auction business is declining in a faster pace. So the question is, do you think that the consumer appetite for auction related business, which has higher friction, has reduced significantly, and if so, do you think its going to headwind, even if the economy recovers for eBay to grow its marketplace business. Thank you.

Thanks, Imran. Let me tell you how we think about it, how we are looking at it. If you step back, we're still in the very early days in e-commerce, right. E-commerce is today only 5% of offline retail. And frankly, I can see that doubling or tripling in the next five to 10 years, because if you think about what e-commerce should be, it should be lot higher than 5% of offline retail. So, it's a large market with lots of long-term growth potential. But like all markets, customer needs evolve overtime. And what it takes to compete and win tomorrow is not necessarily what it took to compete and win yesterday. So, we are the global leader. We have a leadership position and we are the only one with a very strong global footprint, but we've got to evolve our business model overtime to compete and win. And at the end of the day customers are my only compass. And so, we aren't pushing auction versus fixed price. We are trying to offer customers choice. And three years ago auction was 70% of what we did and fixed price 30%. As you heard Bob say earlier today, that it is now 50/50. And frankly, I'm not certain what it's going to be three years from now. But what we are doing is we understand where the Web is going and e-commerce is going and the kind of innovations we need to do and so our strategy is two fold. One, evolve eBay marketplace so that we have a more unique blend of auctions and fixed price and we are, frankly, somewhat indifferent to the format. And then secondly, we understand that there are going to be a growing number of ways to connect buyers and sellers. And so, these alternative e-commerce formats: be they classifieds, be it advertising, be it StubHub, are simply other ways to connect buyers and sellers. And so, we want to build the strongest portfolio of formats and monetization approaches, so that we can continue our leadership position in e-commerce over the next three to five to ten years. And so, frankly, the three or four key themes or principles: one, the best deals online; two, the widest selection; and three, offering buyers and sellers choice whether they trade, auction on eBay, fixed price on eBay or classifieds through net. And I think we are building the foundation that will allow us to compete and win over the next three to five to ten years as this market continues to grow.

Great. Thank you.

Thank you everyone for joining us and we will catch up with you throughout the quarter.

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