Ladies and gentlemen, good day. Welcome to eBay's third quarter 2009 earnings results conference call. This call is being recorded and at this time, I would like to turn the call over to Mark Rowen, Vice President 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 third quarter of 2009. Joining me on today’s call are John Donahoe, our 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.ebayinc.com. 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 those 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. These statements include, but are not limited to, statements regarding expected financial results for the fourth quarter of 2009, anticipated future stability, and growth in the marketplace’s business unit, and the sale of Skype. 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, the impact and integration of recent and future acquisitions, the impact of divestitures, including Skype; our increasing need to grow revenues from existing users in established markets; an increasingly competitive environment for our businesses; the complexity of managing an increasingly large enterprise with a broad range of businesses; our need to manage regulatory tax, IP and litigation risks, including risks specific to PayPal, Bill Me Later, and the financial industry; and our need to upgrade our technology and customer service infrastructure at reasonable costs 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 subsequent quarterly reports on Form 10-Q, also available at investor.ebayinc.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 October 21, 2009 and we do not intend and undertake no duty to update this presentation. And now, let me turn the call over to John.

Thank you, Mark and good afternoon, everybody, and welcome to our Q3 earnings call. Our Q3 revenues topped $2.2 billion, with organic growth up 5% over the prior year. Our non-GAAP EPS was $0.38 and we generated free cash flow of $563 million during the quarter. These are strong results for a strong company getting stronger. Our strategies are working and I continue to be pleased with our pace, our progress, and our performance. Our teams are executing well against the three-year growth strategies we outlined earlier this year. PayPal continues to gain share and drive strong global growth across e-commerce. eBay has stabilized and is beginning to show some positive trends. Core GMV accelerated for the second quarter in a row, and we announced the sale of Skype this quarter, setting this terrific business on a path we believe will enable it to achieve its full potential. As a company, we are operating faster and more efficiently and we are making the right investments in our two core businesses, e-commerce and payments. We are delivering on our commitments and managing our portfolio with focus, discipline, and accountability. All in all, we continue to take the bold steps required to lead and win. Now let’s look at our results from each of our business units. PayPal had a strong quarter with revenue, total payment volume, and active registered accounts up across the board. PayPal's penetration on eBay increased six points year over year to nearly 66% globally, drive by a more streamlined checkout experience and increased adoption of electronic payment. And we just announced the integration of Bill Me Later into the PayPal wallet both on eBay and across e-commerce, giving consumers more choice when they pay online. PayPal's merchant services business gained market share in all regions around the…

Thanks, John. During my discussion, I’ll reference our earnings slide presentation that accompanies the webcast. All growth rates mentioned in my prepared remarks represent year-over-year comparisons unless I clarify otherwise. Overall, we delivered strong third quarter results. We exceeded the high-end of guidance on both the top and bottom lines due to stronger than expected GMV. We continue to execute against our strategic priorities in our two core businesses and we are pleased with the progress we made to date. We gained good momentum throughout the quarter and we are cautiously optimistic as we approach the upcoming holiday season. Our combined businesses generated net revenues of $2.24 billion in the third quarter, a 6% increase. Organic revenue was up 5%, an acceleration of four points versus Q2. The acquisitions of G-market, [DBA Bill Bosson] and Bill Me Later added an additional five points of revenue growth, while a stronger dollar lower our revenue growth by four points. Non-GAAP EPS was $0.38 in Q3, a 16% decrease. The $0.08 decline from last year can be fully explained by a lower yield on cash balances, a one-time tax benefit in the third quarter of 2008, and the impact of foreign exchange. Strong productivity from our operational excellence initiatives, along with modest volume gains, fully offset a decline in take rate, dilution from acquisitions, and business mix. Non-GAAP operating margin was 28.4%, down 340 bps, again driven by dilution from Bill Me Later and a stronger dollar. We generated $563 million of free cash flow in the quarter, or 25% of revenue. CapEx as a percentage of revenues was 8%, an increase compared to the first half of the year due to timing of expenditures on our new Utah data center. For full year 2009, we anticipate CapEx as a percentage of revenue…

(Operator Instructions) We will begin with Mark Mahaney at Citi.

Two questions -- first on the payments margins, can you talk about how we should think about those going forward? Once they anniversary, once you anniversary the acquisition of Bill Me Later, do they stabilize and start growing from there or is it uncertain? Could they just as likely they go up as down? And then marketplace, could you provide anymore color, anything on the linearity of the quarter, particularly products or areas or segments that seemed to have picked up better than others? Is there something that makes you think, particularly in the marketplace business, that Q4 should be materially better than just comps? Thanks.

Yeah, Mark, first on PayPal operating margins, I’ll give you a bit of a macro picture and then a path forward. We indicated earlier this year that we expect to roughly double the PayPal business from 2009 through 2011, and that operating margins will expand to 18% to 20%. This year, essentially each quarter Bill Me Later has impacted our margins by roughly 350 to 400 basis points and as we go forward, we expect Bill Me Later to gradually be accretive to earnings and then accretive to operating margins between now and 2011. We do not expect that to change dramatically in the fourth quarter. We are not expecting any dramatic growth from Bill Me Later as we continue to make the trade-offs of top line growth versus risk. On the second question on marketplace, I’ll make a couple of comments, John, and have you engage as well. I’d say a couple of things -- one, we saw continued trends overall throughout the quarter, so just timeline wise, the last time we spoke to you we had June and early July, a little bit better than earlier in the second quarter. Those trends kind of continued throughout the course of the quarter. On a geography basis, we saw great momentum in the U.K., good momentum in Asia, particularly in Korea with the combination of IAC and G-market. Good momentum in Germany and accelerating progress in the U.S. While we are still down in the U.S., we saw a five point improvement on GMV from Q2 to Q3 so we felt pretty good about relative to how the market performed in the quarter. And that -- you know, both by geography and just timeline, we expect continued momentum going into the fourth quarter. John, any thoughts from your perspective?

You know, Mark, I would just say as Bob said, the economy, we see stable and we are cautiously optimistic about consumer spending going into the holiday. But what is more important from our standpoint is we actually see some progress on our turnaround metrics and as Bob mentioned, they are kind of across geographies and across categories a little bit, and the three outcome metrics that I continue to look at are net promoter scores, which is both for buyers and sellers, the willingness they are to recommend eBay to a friend, and those are up both across buyers and sellers. Second, the [velocity] on our site, which as I mentioned earlier, has accelerated to 8% growth, both sold and purchased items in the quarter. And then most importantly, the market share, which we measure by GMV growth and our global GMV growth in Q3 was 4%, which we believe will end up being faster than the market grew in the third quarter. So we feel like we are making good progress. We will continue to make progress into the fourth quarter and into next year. I don’t see anything discontinuous but I do see good progress across the board.

Your next question comes from the line of Christa Quarles at Thomas Weisel Partners.

I was wondering if you could give us some greater color around the international TPV growth acceleration. Is Japan -- could that be material next year? I’m just trying to better understand the color on the international side. And then just one quick housekeeping item -- have you reserved for the Skype lawsuit? Thanks.

First on PayPal international growth, I’d tell you this has been a trend that you’ve seen continue dramatically. It’s been primarily in Europe across the board. We’ve continued to make good traction, both on eBay through higher penetration and off eBay. And John had kind of highlighted from a merchant adoption standpoint the focus on larger merchants and how that has gotten good coverage, increasing coverage in Europe and in Asia as well. The second area that’s been large for us and in particular a focus out of Asia has been cross-border trade, leveraging some of the unique attributes at PayPal to enable merchants in Asia, particularly in China, to sell product around the globe and give consumers the trust they have come to expect from PayPal by buying from cross-border transactions and that’s been a significant addition over the last -- really the last couple of years. We are using that, building relationships with cross-border trade in markets where eBay doesn’t necessarily have a big presence, like Japan, as a point of entry -- get familiar with merchants that are trying to grow their cross-border trade, use that knowledge of the market to then grow a domestic business. And that’s the relationships that John talked about earlier. I would not -- so over -- I mean, the Japan market is obviously one of the biggest in the world and we expect to be a player in Japan. I do not expect that to have any meaningful impact on our business in 2010. On the Skype lawsuit, we’ve been -- we’re very focused on positioning to close that transaction. We feel good about where we are. We feel very good about our 35% interest on an ongoing basis and I would say our position on the legal disputes has been pretty clear all along, that we are highly confident in the position that we’ve taken on lawsuits.

There’s no new news and the business continues to perform very well and we expect it to close in the fourth quarter.

Your next question comes from Jeffrey Lindsay at Sanford C. Bernstein.

Could you give us an update on the percentage of PayPal accounts that use Bill Me Later? And could you give us any sense of how rapidly that might increase and what you might be doing to try and promote that? Thank you.

Sure, let me take a cut at that. As we said in earlier calls, Scott Thompson did a great job once we bought Bill Me Later of immediately consolidating the sales forces, because Bill Me Later had a real strength in large merchants, which was their historical sweet spot. PayPal focused [inaudible] [to more around] [inaudible] and small to medium sized merchants, so -- and actually the sales force is now being led by a Bill Me Later executive. They have a sort of focus for 2009 and then a focus for 2010. For 2009, it’s quite simply a cross-sale where they are going to PayPal customers that don’t have Bill Me Later and getting them to add Bill Me Later, going to Bill Me Later customers that don’t have PayPal and getting them to add PayPal. And so as I mentioned earlier, over 100 new accounts have added one or the other this year and we now have several of the largest that offer both. In 2010, now it’s going to even the next level because we are going to integrate the product or the pipe that is going into the merchant. So today, the merchant may experience it as two separate products. In six months time, we’re going to be able to go to a merchant and offer them one integration into their checkout flow that will have both Bill Me Later and PayPal built within it. So we feel very good about the merchant adoption. And then on the consumer side, the other part of the fly wheel is getting Bill Me Later into the PayPal wallet and that just launched last week. I was using it over the weekend. Next time you check out with PayPal, when you confirm your funding source, if you are pre-approved for a credit and you have a high enough FICA score, you will have the alternative to select Bill Me Later as your funding mechanism, which is just great. And for those of you that don’t have that offering, I would check into your FICA score.

And Jeff, that was, as John said, that was launched last week or the week before and now Bill Me Later is in the PayPal wallet and on over 150,000 merchants, including eBay. So it’s both on and off eBay and during the course of the fourth quarter leading up to the holiday time, we’ll expand that presence of Bill Me Later in the PayPal wallet on millions of merchants in the near-term, so we are pretty excited by both the sales -- the merchant adoption but also the product that we just launched a week or so ago.

Your next question comes from Brian Pitz from UBS.

Could you talk about where you think you are in terms of improving search on the platform, as well as cataloging your products? And then second, what prompted you to switch your monetization on eBay.com from Yahoo! to Google? Thanks.

On search, you’ll recall back at our March analyst day, Mark Carr just laid out both the challenges and opportunities of search on eBay, the challenge being we had the most unstructured data and the largest data set of any e-commerce provider on the net; the opportunity being we are the largest source of unstructured data and the largest data set of any retailer or e-commerce provider on the net. And so as he mentioned then, the focus this year has been two-fold -- one, to get as many of the categories for which a catalog exists cataloged on eBay and I was just with the search team yesterday and they told me that the product-based GMV, which would be catalog based GMV, hit 17% of our GMV on -- well, Tuesday of this week, which is more than a doubling of where it was at the beginning of this year. So Mark and Chris Hayne and Dane Glasgow have the search team all over rapidly adding catalogs in those categories where it exists. Then the second part of what Mark is doing is building in essence a search platform which will allow us to begin cataloging the uncataloged categories and through community generated tagging and other ways, and we will really begin to see that platform is now built and in the first half of 2010, you will begin to see some of the fruits of those labors, particularly in the clothing, shoes and accessories category. So I would say on -- I don’t know, on a scale of 1 to 10, we have gone from a two to a four, but I feel like the pace is accelerating and I am very pleased and optimistic about the progress we are going to make over the next 12 to 18 months, in ways that you will be able to see as a user, and see in our numbers.

In terms of advertising, as you know we look at advertising as another format to connect buyers and sellers on the web. This has grown from essentially a non-existent business for us to almost a quarter of a billion dollar business and we continue to look at ways to improve our effectiveness and efficiency in serving up the most relevant ads, and sometimes that means ads above the fold, sometimes it means below the fold, sometimes it’s with banners and other times it is with text. Most recently here in the U.S., we are using Google text ads because we think we can provide more and more relevant ads for our community of users. So advertising continues to be an attractive way for us to connect buyers and sellers and we are using Google ads here on our site in the U.S. while we continue to use Yahoo! banner ads or graphical ads here in the U.S. as well, both important partnerships for us, both that we continue to work with to figure out how to provide the best experience for our users.

Very helpful, thanks.

Your next question comes from James Mitchell at Goldman Sachs.

Could you discuss why sold items growth was so rapid in the United Kingdom relative to the United States as it reflects local competitive conditions or eBay actions? And could you talk about sold items versus ASP trends for U.S. GMV?

To be honest, I am pleased with the sold items progress across the board. As I said, globally up 8%. Now the U.K. just had a phenomenal quarter on that front. That is partly driven by currency movements and the U.K. has become a real exporter this year and so because of the weakness of the pound, you will see a lot more U.K. sellers selling outside of the U.K. into continental Europe and into the U.S. So that’s part of what is going on. And secondly, the U.K. e-commerce market is doing better relative to their offline retail market than in other countries because what looks to be happening as new consumers are coming online trying to save money is in essence the best way to put it, so we believe we are gaining share in the U.K. with GMV growth that hit 20% in the quarter, but it’s also market that is growing faster than others because of the new people coming online. And your -- oh, sold items to ASP -- simply put, our sold items are improving and ASPs continue to go down. And if you peel beneath that, people are continuing to trade down. Where they may have bought a brand new BlackBerry, they are buying a refurbished BlackBerry, or where they may have bought a designer sweatshirt, they are buying a private label sweatshirt. And so -- and the good news is we have good offerings across all of those, so ASPs continue to come down both on eBay and on PayPal, we see it in the off-eBay business as well in the PayPal gateway.

The only thing I would add is when John says ASPs coming down, that’s year over year. We haven’t seen any dramatically different trend during the course of the year. ASPs started to fall rather precipitously late last summer into the fall and they kind of stayed that way. In the last six months, I wouldn’t say they’ve gotten any better but they haven’t gotten any worse either.

Your next question comes from Imran Khan at J.P. Morgan.

Thank you so much for taking my questions. It seems like the take rate was down year over year, like around 30 bps or so, so could you please help us understand why did the take rate go down? And secondly, after the Skype transaction, you will have a significant amount of cash in the international market. Can you give us some color on the use of that cash? Thank you.

Imran, I knew that we were in trouble despite the warning by the moderator to limit your questions to one when you had an s on the end of your question word. So quickly, two things -- yes, take rate did come a little over 40 bps when you strip out some of the noise, like step up in vehicles and G-market on the core eBay platform. You know, a few things -- in the U.S. and in the U.K. during the course of the quarter, we essentially took to stimulate our auction business, we took insertion fees on C-to-C items to zero for your first five listings. Earlier in the year, we made some modifications to some features that have impacted us in the second quarter and again more in the third quarter. And then just a little bit of a forewarning that was reflected in the guidance we gave you, John referenced a series of announcements we made, announced in June, put into effect at the end of September where we will continue to provide incentives or deeper discounts for our highest valued sellers and we eliminated some of the feature fees that impeded a wonderful shopping experience -- both of those things will result in continued kind of take rate erosion that you’ve experienced in the third quarter and into the fourth quarter. On your related question of cash, yes, we do end the quarter with $2.6 billion in cash. We generated almost $600 million in free cash flow. We are expecting well over $2 billion in free cash flow for the year, so coupled with the sale of Skype, we will have over $5 billion in cash on hand at the end of the year. You know, I’d say our priorities haven’t changed. First we will continue to maintain a conservative posture on our balance sheet. Secondly, we will continue to work for efficient and effective ways to get a more equal distribution of our cash domestically and internationally. As you know now, almost all of our cash is offshore. And then as we work through those opportunities, we will do the same things, and that is we will continue to look for acquisitions that will strengthen our two core businesses and we will look to opportunistically redistribute cash to shareholders when we don’t believe the value of the firm is adequately reflected in the stock price. That’s what we have been doing over the last couple of years and we’ll continue to do that. The last point I would make is we will be extremely disciplined in how we go about growing the business through acquisition. So thanks for your questions, Imran.

Your next question comes from Youssef Squali with Jefferies & Company. Youssef Squali - Jefferies & Company: Bob, just a quick one on free shipping coverage -- could you tell us what it was last quarter versus I guess the quarter before that? And where does that fit in the marketing campaign that you are starting in early November?

On the first one on the free shipping, no dramatic change Q2 to Q3. We’ve been hovering around 30% mark, just a tad lower. In terms of the campaign --

It’s not a point of distinction, the campaign. The campaign is more around just the great values you find and great deals you find on eBay. So the nice thing about the free shipping, this is a very nice case of the interaction between our marketplace and our selling community, we saw that buyers cared a lot about free shipping. We put an incentive in place in terms of a discount to those that offered free shipping for almost a year, and then we stopped and the sellers in those categories for which free shipping matters continue to offer free shipping and those in which categories that it is less of an issue, heavy goods or high value goods, they don’t. So it’s kind of held even without the artificial stimulus of an incentive. And that’s the way the marketplace works. I think that’s one of the strengths of our marketplace. Youssef Squali - Jefferies & Company: That’s helpful. Thank you.

Your next question comes from Sandeep Aggarwal of Collins Stewart.

John, how high can the fixed price format as a percentage of total GMV? And can you give us some idea in terms of the economic differential between the auction and fixed price format?

Sure, Sandeep. You know, the interesting thing about format is we don’t choose -- our buyers and sellers choose and the actions we took last year made us economically indifferent between the two formats, so our take rates are roughly the same. So in terms of the second part of your question, we are indifferent. And then our platform now allows buyers and sellers choice and it’s not biased one way or another. And so it’s gone from 30% or 70% auction to 30% fixed price -- today it’s more on the 60-40, or 40-60 I should say -- 40 auction, 60 fixed price and I don’t know where it would land. Maybe 30-70 -- we don’t know. We won't drive that; consumers will. What’s interesting is it differs significantly by category, so again this is -- so you take collectibles, collectibles is an auction heavy category because they are items of uncertain value in which an auction is the most efficient way of transacting and doing -- establishing value. The other end of the spectrum would be tickets or books, music, and video which are more commodity based items for which there is a clear market price and those are predominantly fixed price. And so we think one of the real strengths and sources of differentiation of our marketplace is it will fall into an equilibrium, category by category, and over time be the only marketplace that has the balance of both formats.

And Bob, do you want to take the economics piece of that question?

I think John pretty much touched on it in terms of the take rate differential between the two formats, so I think it’s covered. Sandeep, thanks for the question.

Your next question comes from Benjamin Schachter with Broadpoint Amtech.

I was wondering if you could give an update on the consumer loyalty programs. You’ve talked about that in the past but it didn’t come up on this call and I was just wondering why it hasn’t seen that much traction yet and will it be a strategic focus? And then just a very quick clarification -- do the marketplace global active users include G-market? Thanks.

Let me take the first, Ben, and --

No on the second.

Yeah, I think it’s -- on consumer loyalty, it’s still moving ahead. In fact, when I talked about the improvements in the net promoter score, we measure a net promoter score of both our top buyers, which in essence are our most loyal buyers, as well as all active buyers and we saw very positive improvements in both. And we continue to focus on improving the user experience so that they come back and buy more. We’ve also tested -- you know, we did a lot of couponing last year and we are still continuing to do some couponing with experienced eBay buyers that helps them start buying in a new category, and we are being very targeted in that and we think on a targeted basis, that can work. And then lastly, some people on the call may have been in our pilot around eBay Bucks, which is our loyalty program. And we had a -- we’ve gotten a very good experience and feedback from that thus far and we continue -- we anticipate continuing to expand and roll that program out that rewards repeat purchases on eBay. So our focus -- believe me, our focus on great customer experiences and customer retention and loyalty is as strong or stronger today than in any time in the last couple of years. And interestingly, one of the things that I think is also making a difference is I changed the senior management incentives so the top 600 people in the company, part of their annual bonus is driven by improvements in essence in customer loyalty, as measured by net promoter scores. So we made good progress.

Operator, we have time for one last question.

Thank you. That will come from Scott Devitt at Morgan Stanley.

I have a follow-up question just on PayPal segment margins -- could you discuss the segment margin profile of merchant services versus the on-eBay business and whether that mix shifts over time actually has an effect on margin as well? Thanks.

Scott, the way we try to run the business is transaction margin base and transaction margins has three components -- take rate, transaction expense, and transaction losses. And what you have seen really over the last couple of years almost quarter to quarter, despite the rapid growth in merchant services and merchant services becoming a much bigger component of PayPal overall, we have been able to ensure that transaction margins stay above the 60% level. And we kind of laid out the business model and the trade-offs between growth in those three levers. You know, we said that in our kind of three-year outlook, we expect to keep transaction margins in the 60% level. They have stayed that way. Q3 was 62%, which was essentially flat year over year and flat Q-on-Q. So we will continue to manage those three levers, global take rate, transaction expense, and transaction losses to drive growth and roughly 60% margin business and expect that to continue despite the fact that merchant services is becoming a bigger and bigger component of the overall portfolio.

Okay, thank you for joining us and we will talk to you soon.

Ladies and gentlemen, once again that will conclude today’s conference call. Thank you so much for joining us. Have a good rest of your day.