Good day, everyone. Welcome to eBay's first quarter 2009 earnings results conference call. This call is being recorded. With us today from the company is the President and Chief Executive Officer, Mr. John Donahoe, and the Chief Financial Officer, Mr. Bob Swan. At this time I would like to turn the conference over to Mark Rowen, VP of Investor Relations.

Good afternoon. Thank you for joining us and welcome to eBay's earnings release conference call for the first quarter of 2009. 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 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 will 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 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 global economic downturn, foreign exchange rate fluctuations, changes in political, business, and economic conditions, 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 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 reports 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 April 22, 2009, and we do not intend and undertake no duty to update this presentation. And with that, I'll turn it over to John.

Good afternoon everyone and welcome to our Q1 earnings call. We delivered solid Q1 results, exceeding expectations in a tough economy. Revenue was just over $2.0 billion and our non-GAAP EPS was $0.39. We managed our expenses well during the quarter and generated free cash flow of close to $600.0 million. All in all, we are a strong company operating in a challenging global environment. I think it’s fair to say that we have had an active start to 2009. In addition to executing against our priorities, we held an analyst day at which we detailed our three-year growth plans. And last week we made some important announcements that reinforced those plans and move us forward strategically. Before discussing our Q1 results in greater detail, let me recap the strategies and priorities we outlined at our analyst meeting last month. Our company connects buyers and sellers and we are focusing our portfolio on two core growth engines that accomplish this: payments and e-commerce. PayPal is the leading online global payments network and we intend to approximately double this business over the next three years. PayPal has unmatched advantages and will be the leader in online global payments. eBay is competitively positioning itself where we can win in the $500.0 billion secondary market. We are fixing the foundation of our core eBay marketplace by improving trust, value, and selection and we are transforming the user experience. We are also growing other formats, such as classifieds and Stuff hub that connect buyers and sellers. Overall, we expect our total eBay marketplaces business to grow slower than the market this year but with the market in 2010 and faster than the market in 2011. Skype is a great stand-alone business and we’re moving to maximize its potential and value. And we are elevating…

Before I delve into the financial results for the quarter, let me give you the financial perspective on the key strategic priorities that John discussed earlier. First, we are focusing the portfolio on our two core growth engines, payments and e-commerce and we are allocating capital to ensure the full potential of our two core businesses while capturing inherent synergies across them and where synergies don’t exist we will divest our non-core assets. Secondly, we are managing the company with operating discipline and accountability. We are operating smarter to drive efficiencies of approximately $2.0 billion over the next three years in order to free up financial capacity to invest for growth. Technology will be a priority. And third, our business generates strong cash flows and high margins that gives us the flexibility to reinvest to grow and/or return capital to our shareholders. We will be disciplined in how we make these tradeoffs. Our first quarter results and actions are consistent with what we laid out for you at analyst day. Now let’s get into the specifics. During my discussion I will 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 executed well against our strategic priorities in the quarter. revenue came in at the high end of guidance and we exceeded on the bottom line due to solid cost control in a difficult economic environment. PayPal Merchant Services continued its strong growth, marketplaces diversification continued as buyer preference drove format shift and Skype grew rapidly and significantly improved its segment margins. Our combined businesses generated net revenues of $2.0 billion in the quarter, an 8% decrease. Organic revenue was down 1%. A stronger U.S. dollar cost us 9 points of revenue growth and…

(Operator Instructions) Your first question comes from Scott Devitt – Morgan Stanley. Scott Devitt – Morgan Stanley: Two please. The first one related to the $500.0 billion liquidation opportunity. EBay has always been a pretty healthy marketplace for excess and liquidation goods so I was just wondering if you flush that out a little bit. Are there incremental opportunities, are focusing on things like Smart Bargains and Buy.com or could you just walk us through that opportunity in a little more detail. And then secondly, the $2.0 billion of efficiencies that you’ve highlighted over the next three years, it seems like PayPal processing costs are a pretty significant component of that. And in as well shifting payment processing away from credit cards can be helped by Bill Me Later, so I was wondering your early progress in that area of shifting payment processing costs away from credit cards towards ACH transfers, or even with Bill Me Later replacing credit card processing.

Congratulations on your new home. Let me just talk for a minute about secondary market. What secondary market was is a label that attempts to capture what we view as our sweet spot. And let me try to definitize it a little more clearly. On eBay we’re going to have the new in-season merchandise much like every other retailer in the world. You can get the latest HP laptop one of 30 places online, including on eBay. And so our small sellers or advertisers will bring that, but that’s not our primary focus. Our focus is to have that but then to offer inventory that no one else can. And that inventory really comes in, I would say, two or three categories. One is the historical eBay sweet spot, which is the used [inaudible] inventory. But second there is this, as you described, liquidation opportunity that we have frankly always had a piece of. But there is a third piece that we see as one of the fastest growing offline segments as product life cycles compress, particularly in fashion and in consumer electronics, which are brand new items that are one season out of date. And this is whole explosion in outlet malls across the world where retailers want to get rid of this stuff, they don’t want it in their retail store and yet they don’t to deal with getting rid of it. And it turns out that whole segment is very underpenetrated online because it’s a very inefficient supply chain. And so a marketplace, and the eBay marketplace is the perfect place to offer that because we have a wide variety of sellers so that whether it’s an entrepreneurial middle man that got a piece of that inventory or whether it’s a retailer that wants to put it…

Let me take the second question of your one allowed question. You know, we laid out at analyst day our plans over the next 3 years to operate smarter, which we believe will enable us to generate $2.0 billion in cost savings that we would re-deploy to invest and grow. And we really broke it down into three key areas. One was improving the end-to-end customer experience across all three businesses and in doing so increase the efficiency of our sales and marketing spend and reduce contacts into our customer support centers. Secondly, we said we would simplify the organization and as a result lower our overall G&A costs over the three-year time frame. And third, and directly to your point, was transaction expense in our PayPal business is a large component of that expense space and that we believe by offering choice for consumers we could also lower processing costs. And we’ve been making some pretty good progress on this over time. I think the evidence of it is reflected in our transaction expense. It’s been coming down modestly over the last six to eight quarter. We expect it continue to trend in that direction over time and as we integrate Bill Me Later into the PayPal wallet and on eBay we believe that will continue to drive down transaction expense while giving our consumers more and more choice.

Your next question comes from Christa Quarles - Thomas Weisel.

I was wondering if you just highlight the sequential decline in Bill Me Later given that the Q4 number you are reporting is only for about a month and a half. It seems like a fairly steep decline and I was just curious if they have any mix issues that make it more seasonal, I guess, than your merchant service business. And then I was just wondering, also, John, if you could just highlight more on the stabilization that you keep talking about and is embedded in your guidance.

On the first one on Bill Me Later, the primary decline is in the loan portfolio balance at the end of the period so that the full 90 days is not really a driver. But the decline in the loan portfolio or the balance at the end of the period is primarily driven by two things. One is just seasonality. Fourth quarter is a higher quarter for Bill Me Later and then those consumers pay off their balances in a relatively timely manner so Q4 to Q1 seasonality with Bill Me Later is all else equal, going to be coming down. And secondly and probably more importantly is our credit decision you mentioned in that our collective desire and the team’s ability with their decision you mentioned to in tough economic times and tough credit environments with high unemployment, they have the ability in their model to be tighter in their decisioning and we did that during the course of the quarter and as a result we took on lower balances consciously as we tried to manage the dynamics between both growth and risk management.

On the crystallization, or the stabilization, here’s what we’re seeing. There is no doubt it is a tough economic environment and that’s global. We see that in the U.S., the U.K., going down Continental Europe and across Asia. And if we were to piece apart the quarter, it was getting worse in the first four to six weeks of the quarter and over the last, really four weeks, we say growth rates stabilizing. Now they aren’t stabilizing at rates we like. We like the fact that they are stabilizing at 30% organically with PayPal merchant services but we would like that to be 40% or 50%. We don’t like the fact that they are stabilizing at minus 5% in our core GMV business. We would like that to be plus 5%. But nonetheless we see the decline has flowed and they seem to be kind of flat-lining a little bit. So we can’t, we don’t have any crystal ball better than anyone else about what is going to happen in the global economy in the second quarter and second half of the year, but we are focusing on what we can control, which is trying to provide great value for both our buyers and sellers, consumers and merchants.

Your next question comes from Mark Mahaney – Citigroup.

Just a quick question on the Skype segment margin. I think that 23%+ is nicely above your long-term margin outlook. Is there something new? And it also seems like you had some new product and events roll out this quarter so that makes that 23% even more impressive. Is there something that brings that down over the balance of the year and through the next two years and the reason why we shouldn’t think about that as the steady state going forward?

When we talked to you at analyst day we highlighted both the progress the Skype business is making and our belief that we can more than double the business over the next three years and gave a margin structure in the 18% to 20% range. Quarter-over-quarter margins have continued to expand but we are going to make sure that we continue to reinvest to fully capitalize on the long-term growth potential of Skype. We believe that at this stage that over the next three years 18% to 20% is probably the right range to be thinking about, making the appropriate investments to invest and grow and enhance its competitiveness.

Your next question comes from Doug Anmuth - Barclays Capital.

Bob, can you give us a little bit more color on the comments you made on the back half of the year, and in particular the comments on GMV and TPV stabilizing, but you’ll be on easier comps there in the back half. And does that include Gmarket being slightly accretive as well, for the year.

If you don’t mind, I’ll try to be a little more holistic about what we know but also what we don’t know and in terms of how we have tried to be as transparent as we can in articulating both the second quarter and the second half of the year. The second quarter’s guidance essentially reflects John’s comments before about stabilization and growth rates in our core business Q1 to Q2 on a year-over-year basis. And revenues we expect will come down, not because of a lack of stabilization but more a function of seasonality of Q1 to Q2. And then secondly, take rates coming down Q1 to Q2 as more of our sellers provide better service and as a result the power seller discounts continue to go down. So that we feel relatively comfortable with, the first half. In the second half, we are not going to give full year guidance, just like last quarter. What we are trying to do is trying to tell what we know is going to happen that’s within our control. When we look at the second half a couple of points worth mentioning. One is clearly the comps will be easier for a couple of reasons. One is, as you will remember, last year in the August time frame, and for the rest of the year, things got pretty hairy in the global economic environment and that dramatically impacted our second half results. And two, currency comps get much easier in the second half. So those two things, strictly from a comp basis, will work in our favor. At the same time, we are going to continue to take the steps necessary to improve our competitive position and we believe our sellers are going to continue to adopt their models to provide better…

Your next question comes from Jeffrey Lindsay - Sanford Bernstein.

I notice that net charge offs are still going up [inaudible]. Could you give us an indication, is this deterioration in the original book of business and more days or is this being driven by new business that you are booking since the acquisition? And then, second, the fixed-price format seems to be stronger, have stronger adoption overseas. The results suggest that fixed price seems stronger overseas. Is this the case or are we seeing currency effects here?

Let me answer your first question and then I’ll ask you to maybe clarify the second part because I’m not sure I got it. In terms of Bill Me Later’s charge offs, the first point I would make is it’s relatively as we expected so provisioning levels and how we set provisions haven’t really changed from pre-acquisition to time of close in really over the last four or so months and it’s been in the portfolio. So it has kind of trended as we have expected. What has trended a little bit worse, or better than we expected, depending on how you think about it, is the growth of the portfolio, it is not growing as much as we thought. And that has been a conscious decision. And as a result the loan portfolio is not growing as much, the denominator is smaller, charge offs have been relatively in line with what we thought, and as a result the net charge off percent has been growing a little bit more. So it’s more a function of the business and the credit decisioning that we’re making as opposed to higher charge off dollars than we anticipated at the time of the acquisition. Could I ask you if you could just restate the second question a little bit so I understand a bit better.

Yes. Is fixed price growing faster overseas or is it growing faster in the U.S.

You know, when we gave you the fixed-price dynamics and the geographic dynamics and implied in that is, yes, internationally the business is growing faster than it is here domestically and that goes for fixed price as well.

But we aren’t seeing fundamentally different consumer behavior across formats, certainly across the U.S. and Europe. Asia has always been North Asia, Korea, China, have always been primarily fixed-price markets so IAC has been a truthfully fixed-price market. Gmarket in essence if fixed-price. But the underlying consumer behavior and format choice it seems, fixed price, classified, auctions, advertising, we see some real similarities across the major European countries, Australia, and the U.S.

Your next question comes from James Mitchell – Goldman Sachs. James Mitchell – Goldman Sachs: I am going to waste the one question on a clarification since American is my second language. But when you refer to declines in GMV and TPV stabilizing, do you mean that the GMV and TPV stabilize at the first quarter dollar levels, which I guess would be good for the marketplace and not so good for PayPal, or do you mean that the percentage rates have changed, persist through the year at similar levels so the percentage rates have changed in the first quarter?

I’m sure it’s not our language, I’m sure it’s my communication. Stabilizing at the growth rates in Q1 going into Q2. So the year-over-year growth rates stabilizing roughly the same in Q2 and they were in Q1, for both merchant services, TPV, and non-eBay growth.

Your next question comes from Justin Post – BAS-ML. Justin Post – BAS-ML: When you look at the GMV declines, and your classified are definitely growing, how much pressure do you think is being put on GMV by some growth of your other formats or other things that are out there in the e-commerce market? And then maybe just a follow-on, you kind of indicated you think you can grow with the market in 2010 and then grow faster in 2011. What things are you seeing in the marketplace that maybe are masked by the economic environment that give you confidence that you can start taking share as you look out a couple of years.

On your first question on the classifieds, as I said our strategy is to give buyers and sellers choice and to give them choice of format so they can buy what they want, when they want it, in the format they want it. And what we are finding, interestingly, is people do buy different things in different formats. That the same buyer will buy a used Coach on a classified site, buy a gift for their grandmother in the auction format, and buy a new watch on a fixed-rate format. And so, yes, we think there is some substitution for classifieds for what used to be in auctions because auctions used to be, or auctions is primarily focused on items that are either hard to find, which often used items are, or if items are of a certain value, which used items are, and classifieds is a nice format for used items if you want to sell locally. So the good news is we recognized that three or four years ago and have been building what is a growing classified business. And so our whole strategy in e-commerce is to have these complimentary formats and if classifieds grows more quickly than another format, that’s okay, as long as we’re helping that buyer and seller connect successfully. Same thing on the seller side. We see sellers that sell both in classified and in the marketplace. And then in terms of growing ads more faster than the market, again, every format we have except auctions is growing faster than e-commerce. So fixed price is growing faster than e-commerce and has been now for many quarters. Classifieds is, Stuff Hub is, advertising is, even though it really softened this quarter. And auctions is the only format that’s not. You know. Good, bad, or indifferent, auctions, two years ago accounted for three-quarters of what we did. Today it accounts for half of our GMV. Two or three years from now it will account probably for, I don’t know, 30% or 40%. And so we think that dynamic, combined with the changes we are making, we believe are going to improve the health of our underlying eBay marketplace over the next six to twelve to eighteen months. And so we think the combination of those two factors make us comfortable saying that we will grow with the market next year.

Your next question comes from Heath Terry – FBR Capital Markets. Heath Terry – FBR Capital Markets: I was wondering if you could give us a sense of the impact that you’re seeing from the proliferation and free shipping on repeat customers. Is there anything more that you can do with what your free shipping among sellers to the extent that maybe at some point you start to require it in certain categories?

Clearly free shipping is becoming more prevalent in shopping online. Our best sense is that roughly 40% of e-commerce in the United States is free shipping. And we’re now up to 30% on eBay. And our strategy, consistent with our philosophy, has been not to dictate it but to provide the right incentives and words for sellers to make the right tradeoffs. And what we see is, it’s a very different picture, category by category, where there are certain categories now where it’s almost a given it’s going to be free shipping. Books, music, and video, a lot of the smaller consumer electronics categories. And any seller that doesn’t offer it won’t succeed. So we have provided incentives to do it, we have provided advantages in search to sort of get it kick-started. But you’ve seen other categories, items that are of heavier value or often in an auction situation, people charge for shipping. They charge their costs. And we try to drive out excessive shipping but what they have found, and again, our sellers are very shrewd, they are optimizing to what’s working for them and what’s helping them in their conversion, and those categories they are continuing to charge for shipping. So we are going to continue to sort of provide the carrots and incentives and rewards for those that provide free shipping and the best value and we think our marketplace will find its natural landing point. My guess is there’s probably 10 points more. I would guess we will be 30% to 40% by the end of the year. And that is what overall e-commerce is. I mean, it’s important to remember that 60% of e-commerce still charges for shipping. And I think once we get to the right equilibrium we will continue to moderate and self-correct.

Your final question comes from Analyst for Youssef Squali - Jefferies & Company. Analyst for Youssef Squali - Jefferies & Company: John, as you evaluate your portfolio of assets, would it be fair to assume that essentially all the options are on the table, including the possible sale of your interest in Craig’s List where you have a 20% equity interest and as well as the assets such as shopping.com that you have, which has been underperforming?

As I said in our panel today, our focus is on connecting buyers and sellers and we have two core growth engines, or businesses that do that: e-commerce and payments. And in the e-commerce world we have our eBay business and we have some other formats that we think have synergies with the core eBay business, like shopping.com provides capability synergies in terms of classification, catalogue, and search. Classifieds provides synergies in the ways I was talking about early, and our craigslist ownership, we have no active plans one way or another. Stuff Hub is another example of a different e-commerce format that we think has strong synergies with our core business. Stumble Upon, while we initially thought it might have some synergies with, and capability synergies around search, discovery based search, didn’t. And once we came to that determination, we divested it. Same thing in payments, our other core business. Bill Me Later is an example of an adjacency that has got synergies. And Skype was our example of a business that didn’t have synergies, and as I said, I’ve been very consistent from the day I took over CEO, we assess it and we will evaluate it. So here’s what I think you can expect. Is everything on the table? Yes, in the following sense. We view as job as to drive maximum value for our shareholders. We believe the best way we can do that is to have strong core businesses that have synergies we’re extracting and we grow those businesses and strengthen them over time and that will deliver the best value to shareholders. Where we see there’s not synergy or where that synergy is not what we imagined or gets spent out, then we’ll act in the best interest of both that business and shareholders. And I hope you are beginning to see a track record of doing that with Stumble Upon in a small way and Skype in a bigger way. And we will continue to apply that methodology, we will be very disciplined with our capital. Bob does a great job of ensuring we’re doing that and I think you will see our acquisition track record in recent years will bear fruit. And so we will continue to run the company that and we think that’s the best way to deliver value for our customers and deliver value for you and our shareholders.

This concludes today’s conference call.