eBay Inc. Reports Third Quarter 2008 Resukts

“Overall, we are pleased with the performance of the portfolio this past quarter,” said eBay Inc. President and CEO John Donahoe. “We took a number of steps during the quarter to further strengthen our business and better align our cost structure to invest and compete. We will continue to stay focused on connecting consumers on our various ecommerce platforms, maintaining financial discipline and capitalizing on new opportunities for growth.”

eBay continues to benefit from an increasingly diversified portfolio of businesses. While Marketplaces transaction revenue still represents a majority of revenue for the company, revenue growth rates were helped by growth in PayPal, Skype and global classifieds. The company’s global footprint helped it benefit year over year from strength in other currencies relative to the U.S. dollar.

GAAP operating margin increased to 24.7% for the quarter, compared to (49.6%) for the same period last year. Non-GAAP operating margin increased to 31.8% for the quarter, compared to 31.4% for the same period last year. The year-over-year increase in non-GAAP operating margin is due primarily to higher margins from each of the business units, which more than offset the growth from lower-margin businesses, primarily PayPal and Skype.

eBay Inc. generated $693 million of operating cash flow during the third quarter. Free cash flow during the quarter was $543 million.

Quarterly Business Highlights

eBay Inc. was honored by the White House and U.S. Department of Commerce with the National Medal of Technology for leadership in technology and innovation that has enabled millions of entrepreneurs to participate in the global ecommerce market.

Marc Andreessen, founder of Netscape, Loudcloud and Ning, joined the eBay Inc. board of directors.

eBay Inc. repurchased approximately 25 million shares of its outstanding common stock at a cost of approximately $623 million. Since the inception of the stock repurchase program in the third quarter of 2006, the company has repurchased approximately $5.3 billion of its common stock.

eBay lowered listing fees for the Buy It Now format by more than 70% and extended listing periods to 30 days, up from seven.

The company’s global classifieds businesses averaged 84 million unique visitors per month during the quarter, representing an increase of 55% year-over-year.

StubHub entered into a partnership with the NFL’s New York Jets franchise to auction personal seat licenses for the football team’s new stadium. PayPal launched merchant services deals with Walmart.com, William Hill (U.K.), Continental Airlines, American Eagle Outfitters, BagsOK (China), newegg (Canada) and OfficeMax, among others.

Payment volume from PayPal’s merchant services business exceeded the volume received from the eBay marketplace for the first time.

Skype surpassed 13 million concurrent users at certain peak times. § Skype-to-Skype minutes reached nearly 16 billion, a 63% increase year over year. Financial Highlights (presented in millions, except per share data and percentages)

Net revenue Q3 2008: $2,118 Q4 2007: $1,889 Change: $228; 12%

GAAP Net income (loss) Q3 2008: $492 Q3 2007: ($936)* Change: $1.428

Earnings (loss) per diluted Q3 2008: $0.38 Q3 2007: ($0.69)* Change: $1.07

Non-GAAP Net income Q3 2008: $592 Q3 2007: $564 Change: $28; 5%

Earnings per diluted share Q3 2008: $0.46 Q3 2007: $0.41 Change: $0.05; 11%

* Includes goodwill impairment charge of $1.39 billion recorded in the third quarter of 2007, which was not deductible for tax purposes.

Quarterly Business Unit Discussion

Marketplaces The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, had a solid third quarter, generating $1.38 billion in revenue, representing 4% year-over-year growth, 53% of which was generated outside the U.S. The business unit saw strong growth in advertising, StubHub and classifieds. Revenue from our text and graphical advertising partnerships grew 127% year over year. Gross merchandise volume was $14.28 billion for the quarter, a decrease of 1% over the third quarter of 2007. Marketplaces continues to focus on customer-facing initiatives designed to make transactions on the eBay platform safer and its various global sites easier to use, while enhancing selection in a uniquely eBay way.

Payments PayPal had a strong quarter with $597 million in net revenue, an increase of 27% year- over-year. Net total payment volume (TPV) for the quarter was $14.81 billion, an increase of 28% year over year. The net revenue and net TPV growth was driven primarily by the continued excellent growth of merchant services globally and increased penetration on eBay. Global active registered accounts increased to 65 million, representing 19% year over year growth. Globally, PayPal will continue to focus on greater penetration into the Marketplaces business and the acquisition of new merchants.

Communications Skype continued its robust growth trajectory, reporting $143 million in revenue for the quarter, representing 46% year-over-year growth. Skype added 32 million registered users in the quarter, ending the period with more than 370 million registered users around the world. In addition to growing its user base, Skype is focused on product strategies to enhance customer engagement.

Other Selected Financial Results

Taxes - The GAAP effective tax rate for the quarter was 13%, compared to (4%) for the third quarter of 2007 and 19% for the second quarter of 2008. The non-GAAP effective tax rate for the quarter was 17% compared to 10% for the third quarter of 2007 and 22% for the second quarter of 2008. The decrease in the sequential non-GAAP effective tax rate is due to changes in the estimated geographic mix of the company’s taxable income for the year. Cash and cash equivalents -— The company’s cash and cash equivalents totaled $3.34 billion at September 30, 2008, compared to $4.22 billion at December 31, 2007. Other Updates

On October 6, 2008 the company announced that it had entered into an agreement to acquire Bill Me Later, acquired Danish classifieds sites dba.dk and bilbasen.dk and planned to reduce its global workforce by approximately 10%. Business Outlook

The following updated guidance reflects current business trends as well as the impact of the acquisitions and the impact of the reorganization of the company’s workforce noted above. The impact of the approximately $70-80 million restructuring-related charge will be taken primarily in the fourth quarter and is included in GAAP guidance but excluded from non-GAAP guidance. .

Full year 2008 - eBay now expects net revenues in the range of $8.525 to $8.675 billion with GAAP earnings per diluted share in the range of $1.32 to $1.34 and non-GAAP earnings per diluted share in the range of $1.69 to $1.71. Fourth quarter 2008 - eBay expects net revenues in the range of $2.020 to $2.170 billion with GAAP earnings per diluted share in the range of $0.25 to $0.27 and non-GAAP earnings per diluted share in the range of $0.39 to $0.41. Quarterly Conference Call

eBay will host a conference call to discuss third quarter results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company’s Investor Relations web site at http://investor.ebay.com. In addition, an archive of the webcast will be accessible through the same link.

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