Stu Haas – Vice President of Investor Relations Barry Diller - Chairman & CEO, InterActive Corp. Dara Khosrowshahi – CEO, Expedia Inc. Michael Adler - CFO

Robert Peck - Bear Stearns Doug Anmuth - Lehman Brothers Paul King – CIBC World Markets Anthony Noto - Goldman Sachs Christopher Gutek - Morgan Stanley Michael Millman - Soleil Securities Group Scott Devitt – Stifel Nicolaus Mark Mahaney – Citigroup Aaron Kessler - Piper Jaffray Imran Khan – J.P. Morgan Scott Kessler – Standard & Poor’s

Welcome to the Expedia, Inc. fourth quarter 2006 conference call. During today’s presentation all parties will be on a listen only mode. Following the presentation the conference will be opened for questions. If you have a question please press the * key followed by the number 1 on your touch tone phone. If you would like to withdraw your question, press the * key followed by the 2. We do ask that if you’re on a speaker phone that you lift up the handset before making your selection. This conference call is correct to today, February 15, 2007. I would like to turn the conference over now to Stu Haas, VP of investor relations. Please go ahead, Sir.

What if there was a way to promote your company to a perfectly targeted group of potential customers, partners, acquirers and investors? What if you could tailor your pitch to them at the moment of maximum interest? And what if you could do this for a no-brainer price?:

Company sponsors partner's transcript: Company sponsors competitor's transcript: Issuer-sponsored research firm sponsors client's transcript:

IR firm sponsors transcript of micro-cap company: Consulting company sponsors company's transcript in sector of interest: Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details.

Good morning and welcome to Expedia Inc.’s financial results conference call for the fourth quarter and year ended December 31, 2006. Joining me on today’s call are Barry Diller, Expedia’s chairman and senior executive, Dara Khosrowshahi, our CEO, and Michael Adler, our CFO. The following discussion including responses to your questions reflects management’s views as of today February 15, 2007 only. As always, some of the statements made on today’s call are forward looking including our comments on financial expectations, operational performance and margins, planned investments and spending, platform improvements, systems upgrades, growth of business lines, financial performance and dilution. Actual results may differ materially. We do not undertake any obligation to update or revise this information to reflect future events or circumstances. Please refer to today’s press release and the company’s filings with the SEC, including our form 10K for the year ended December 31 2005, and our subsequent 10Q filings for additional information about factors that could potentially affect our financial and operational results. During this call we will discuss certain non-GAAP financial measures including OIBA, operating expenses excluding stock-based compensation, free cash flow, adjusted net income and adjusted EPS. In our press release, which is posted on the company’s IR web site at Expediainc.com/IR you will find additional disclosures regarding these non GAAP measures, including reconciliations of these measures with the most comparable GAAP measures. We encourage you to review the section entitled “Basis of Presentation” in today’s earnings release for more details of how we’re presenting results for full year 2005. Finally, unless otherwise stated in this call all references to gross margin, selling and marketing expense, general administrative expense and technology and content expense exclude stock-based compensation and all comparisons will be against our results for the comparable period of 2005. And with that, let me turn the call over to Dara. Dara Khosrowshahi: Thanks, Stu and thank you to everyone for making the time to join us on the call. As most of you know during 2006 we celebrated Expedia.com’s 10th anniversary and while we take pride in our progress we’re very much focused on the next decade for Expedia, Inc. As such our senior management team recently developed a new mission statement for the company which is: “Expedia gets the world going by building the world’s largest and most intelligent marketplace”. This statement reflects our fundamental role in facilitating travel, whether for business or for pleaseure, as well our commitment to providing travelers with the very best resources to serve their travel needs. In doing so we’ve leveraged Expedia critical assets: Our global reach, our brand portfolio, our leading technology and the breadth of our product offering. And we take advantage of a growing base of knowledge about our destinations, suppliers and travelers based on the unique position that we maintain in the value chain. I don’t want to say too much about tactics at this time, but we look forward to shedding more light on our implementation in the years to come. Moving to results, 2006 was a year of progress at Expedia. We generated over $17 billion in gross bookings and $525 million in free cash flow . We launched four new Expedia branded web sites. Three in Scandinavia, and one in Japan and we’re excited about leveraging our existing technology and supply infrastructure to launch India in 2007. Hotels.com more than tripled its worldwide annual growth rate to 20%, reaching $2.3 billion in bookings. And ECT grew annual booking 45% to over $1 billion and posted its first full year of operating profitability. Our partner services group made huge strides on the supply side of the house. Signing our extending partnerships with Hyatt, Kempton, Louve, Joie de Vivre, Accor, in hotel; Enterprise, Dollar, Thrifty, and Vanguard in car, and Continental U.S Air, United and AirTran on the air side. And we successfully diversified our GDS business to include Amadeus and Sabre. Lastly the team continued to execute in early ’07 with recently signed agreements with Frontier Airlines, Hertz and Shangri-La Hotels and Resorts. We demonstrated our ongoing dedication to long term shareholder returns in ’06 by efficiently managing dilution keeping net equity awards to less than 1% of outstanding shares. We completed a first debt offering and put in place share repurchases for nearly 15% of our outstanding shares. And we have an additional 20 million share repurchase authorization remaining. That said, 2006 was not without its challenges and we’re certainly not happy about delivering negative OIBA growth for the year. But I think it’s fair to say that after a rough start we stemmed the tide to continue growth in our international and merchant hotel businesses, expense control, and stabilized revenue margins. These developments enabled us to end the year on a more positive note with 10% operating income before amortization growth and a slight reacceleration in transaction, bookings, and revenue growth in Q4. As a result we delivered on our original expectation from a year ago, a positive OIBA growth in the second half of the year and we came in at the high end of the full year OIBA range that we articulated with our beginning Q2 call. Shrinking OIBA is simply not acceptable but I am pleased by our ability to deliver results more in keeping with expectations on the last few earnings calls. We still have room to go on this front but the improvements we’ve made combined with the progress on stabilizing operating profitability, strength in our confidence that absents some dramatically adverse outcome in our remaining air discussions, we remain on a path for OIBA growth in 2007 and beyond. Our first priority in 2007 is turning the ship around at Expedia.com. As we anticipated Q4 was not much improved from Q3 for Expedia.com but we have made progress on several fronts aimed at reigniting momentum in 2007. We’ve launched a new home page design and while it’s too early to gauge the impact of the redesign, the initial trial indicates that the simplified layout is more relevant and appealing, easier for users to navigate and encourages broader exploration versus just spear fishing. I encourage you to take a look and to let us know what you think. Further results from our ThankYou rewards program are also very encouraging. We’re very happy with consumer adoption of the program which with more than 200 000 enrolments in three months is ahead of our expectations. While we don’t anticipate that ThankYou will have a significant impact on overall result in the near term, we’re closely analysing member behavior to optimize the program. We’re also looking forward to launching a co-branded credit card later this year to provide travelers with even more ways to earn loyalty rewards with Expedia as well as marketing efforts from City aimed at their existing ten million ThankYou members. On the traffic side of things our private label and co-branded businesses had some nice wins recently. Expedia is now the exclusive travel booking engine for the NewYork Times.com and for Sam’s Club. While we continue to see very significant year on year declines from MSN we remain focused on trying to counteract that trend with new sources of traffic much like these two partnerships. And as get into Q2 we’ll begin to lap the downdraft of traffic from MSN. I’m also very pleased to say that we’re in the final stages of readying our 2007 branding campaign which will launch by the end of this month. As always travelers will be the final judges but I like what our team has come up with to answer the question, “Why Expedia?” when it comes to booking travel. We will also do a much better job this year of integrating our various marketing touch points for customers from our websites to our e-mail campaigns to our broad based media campaigns on T.V, Print, and Radio. We believe these initiatives, in concert with several others we expect to roll out during the year have the potential to reignite the top line growth at Expedia.com in 2007. While we continue to face challenges at Expedia.com, we’re happy with the progress in other parts of our business. Our international points of sale continue to execute well and grow at healthy rates. We saw particular strength in Europe including Germany, Italy, and Hotels.com in Europe, each of which posted over 50% gross bookings growth in Q4. ECT had another solid quarter with worldwide bookings growth of 30% for the quarter and continue to build on its impressive growth with record new client additions in Q4. We expect to see continued global expansion from ECT in 2007. TripAdvisor continues to aggressively enrich their content and functionality with video uploads to travel reviews as well as a save-it-and-go personalization feature which allows users to file content into their personal my trips folder for easy reference and access. Just as important as these innovations on trip advisor sites, are our efforts to better leverage its content across our brand portfolio. Visitors to our Expedia.ca site in Canada and our Speedy.com.au in Australia can now find trip advisors attraction and destination content in a new destinations tab. Where they can add and edit inside pages content for functionality which is then published both on TripAdvisor and Expedia sites. This has been a terrific test bet for us, and we look forward to leveraging this valuable content across other sites, including Expedia.com Lastly, an update on Hotwire. 2006 was an especially difficult year for Hotwire in light of merchant error challenges. Despite this management had strongly executed by diversifying its revenue base to hotel and car, pursuing partnerships to expand the top line and also delivering a world class experience to their travelers as evidenced by the J.D. Powers and Associates number one ranking for highest customer satisfaction for independent travel websites. Hotwire also watched its travel ticker service including a bi-weekly e-mail to more than ten million subscribers, which now features exclusive travel deals that are geo-targeted based upon the recipients location. As a result of this perseverance and an easier comp against last year Q4 when we first started to face air challenges, Hotwire generated its first quarter of positive revenue growth in five quarters. Let me turn to supply and update everyone on where things stand. While the air environment remains challenging, we saw glimmers of light in Q4. Air revenues declined at a slower rate and we saw positive growth and air tickets sold for the first time in three quarters. We remain in discussions with several airlines and while we look forward to bringing these discussions to close, our philosophy with regards to these discussions has not and will not change. We’re focused on optimizing the business for the long run and we’re prepared to make sacrifices in the short-term to that end. Based on what we know today, we expect to see another step down in revenue per ticket in 2007 similar to what we saw in ‘06 as we absorb a full year of revised GDS and airline economics. We expect the step-down to be weighted towards the first half of the year as will fit easier comp in the second half. And we remain cautiously optimistic that 2008 will bring more flash comparisons as it relates to the non-booking sea portion of our agency air revenues. On the hotel front we’ve begun renewal discussions with our major hotel partners whose contracts expire in ’07. We continue to believe that our current economics with hoteliers appropriately reflect the value we deliver, but it’s too early to predict the outcome of the renewals at this time. We hope to provide more colors as we put deals to bet in quarters to come. And real briefly on the technology front, as it relates to platform re-design, we remain on track to begin migrating on to our new platform over the next few months. And we’ve improved our migration strategy rather than move in higher points of sale over time we plan to take more practical approach and prioritize the migration of those pages across our points of sale that will most benefit from the enhanced technology. Our enterprise data warehouse successfully launched in Q4 with an initial focus in the accounting and socks testing areas. We will shortly begin using the system to harness our customer data, to enable significant improvements in terms of personalization, merchandizing and segmented marketing. We expect to make progress on this front through 2007 and 2008. In closing, Q4 was another solid quarter for Expedia, Inc., in which our international business as well as Hotels.com, TripAdvisor, ECT and Hotwire all executed well. As we look forward we will focus our efforts on building our brands globally, with a heightened emphasis on returning Expedia.com to positive growth. We don’t expect to achieve this growth through quick fixes, but we certainly need progress and we look forward to continued momentum in 2007. Mike?

Great. Thanks, Dara. Good morning everyone. I’d like to provide you with a review of our results and close with our financial expectations for 2007. Let me begin with gross bookings. Worldwide gross bookings were up 9% for the quarter on 3% transaction growth. Our domestic gross bookings growth of 1% continue to lag mainly due to continued weakness at Expedia.com and the deceleration at Hotels.com as they anniversaried a high growth quarter. We also experienced slower domestic growth at ECT due to soft client additions in early ‘06 on top of tighter travel spend on US corporate clients toward the end of the year. Our international businesses continue to accelerate in Q4, posting 34% growth in gross bookings, or 27% - excluding the impact of foreign exchange. Europe was particularly strong in both leisure and corporate representing over 70% of the international bookings growth. From a product standpoint, we were happy to see worldwide airline ticket growth return to positive levels in the quarter, including a five percent increase in agency tickets sold as we benefited from increased content and less rapid growth in airfares. Our merchant hotel business continues to be a significant driver of overall revenue growth, more than off-setting the declines we’ve seen in air revenues. While (inaudible) might grow slow in Q4, total merchant hotel revenue growth accelerated to 15% on the strength of higher ADRs. On the packages front, we saw some slight improvement in Q4 with revenue up 1%. As we mentioned in our last call, we did make some pricing changes that reduced the negative impact on profitability without degrading the top line. Despite these efforts, we were not able to off-set the industry wide pressure on domestic package volumes resulting from diminished availability of merchant air. While packages were soft throughout ’06, I think it’s important to note, this dynamic has primarily been driven by the domestic market. Our international package bookings accelerated throughout the year, growing more than 40% in Q4. While international is smaller than our domestic packages, it is growing rapidly and we are beginning to see it have an impact in off-setting some of the current decline in the domestic packaging business. Worldwide revenue margins declined 16 basis points to 14.4%, with domestic margin flat at 14% and international margin down approximately 100 basis points to 15.5%. The largest driver of decline remains the decrease in the air margins due to lower revenue per ticket and higher airfares. The good news is that we continue to see an increasing mix of higher margin merchant hotel business, which partially off-sets the impact of air margin declines. Hotel raw margin declined approximately 30 basis points in Q4. Consistent with our expectation of more favorable comps in late ’06 as we completed lower margin hotel deals struck in late ’05. While it’s a bit pre-mature to predict the next round of hotel negotiations, we do expect that any raw margin degradation we may experience in 2007 will be less than the 100 basis points we experienced in full 2006. And that impact felt would be greater in the second half of ’07. Turning back to the PL, gross margins declined 31 basis points in Q4 despite an increased mix of merchant hotel revenue, due to the insourcing of certain high touch traveler care activities as well as cost associated with implementing our GDS diversification effort. Sales and marketing expense grew 8%, slightly ahead of revenue growth, primarily reflecting an increased investment in our partner services group and the expansions of our ECT in destinations and services sales forces. Our direct sales and marketing costs grew just 2%. In 2007 we expect the absolute amount of selling and marketing expense to increase, driven in part by increased brand advertising for Expedia.com. The extent of leverage of de-leverage we see will depend on our ability to drive efficiencies across our various marketing programs, as well as the product and geographic mix of our business. General and administrative expense increased 4% primarily reflecting increased legal fees. Technology and content expense was down 2% and remains fairly stable in absolute dollar terms throughout the year. It is important to note the bulk of our ’06 software development expenditures had not been placed in this service by the end of Q4. So we expect this expense to increase in earnest in Q1 and throughout ’07 and we expect even greater de-leverage from technology and content in ’07 than we saw in full year ’06. As a reminder, the operating expenses just discussed exclude stock based compensation. Cut-backs in the fourth quarter were $25 million, bringing full year cut backs to $93 million. In addition to our spending on re-platforming, and our enterprise data warehouse, we invested in a number of technologies to analyze site activity, improve long term conversion, and bolster our call center and network infrastructure. On the bottom line, we delivered, Q4 OIBA of $146 million, up 10%, reflecting 7% gross profit growth, and leverage in G&A and technology and content. Full year ’06 OIBA was down 5% on gross bookings growth at 10% and revenue growth of 6% reflecting 59 basis points of lower revenue margin and higher operating expense. Our business generated $525 million of free cash flow in ’06 compared to $807 million in ’05. The decrease was primarily due to higher cash taxes in CapEx, less working capital benefit as we increased the efficiency of our supplier payment process, and lower OIBA and interest income. As described in the release we have reclassified the effect of exchange rate changes on our cash balances from cash from operations to effective exchange rate changes on cash and cash equivalents. This has the effect of reducing cash flow from operations, but I want to emphasize that there is no impact on our actual cash balances due to the re-class. I’ll close with our expectations for full year 2007. Absent something dramatically different from our current expectations on the air side, we expect to return to positive single digit OIBA growth in 2007, with revenue margins declining year on year, albeit at a slower rate than what we experienced in 2006. While we don’t provide specific entry year expectations, we do expect to see more flattish growth in the first half of ’07 than in the second half. Q2 will be a particularly tough comp do to our strong OIBA growth last year, and higher relative marketing expenses in Q2 ’07, as we’re starting our brand spend later this year. As a reminder, last year we turned our brand spending down in Q2. We’re optimistic that we won’t have to take such action this year. In addition, we delayed some marketing spend in Europe in Q2, in anticipation of the World Cup, which we won’t have to do this year. We should see faster growth in the second half of ’07 as we anniversary the tougher air revenue environment from second half ’06, gain more benefit from marketing investment as we move through the year, and see the anticipated growth improvements on the Expedia.com front. I also want to make you aware that our expectations for 2007 assume foreign exchange rates remain where they have been recently. Last quarter we mentioned that CapEx in 2007 will be higher than in 2006, we currently expect CapEx to increase 5-15% in ’07, reflecting continued investments in our infrastructure initiatives. I also want to emphasize that while we will begin leveraging our new platform in enterprise data warehouse in ’07, the financial expectations I just outlined assume no material financial impact form these initiatives. Lastly, we expect a modest decline in free cash flow due to higher CapEx, some additional compression from working capital, and higher tax related cash payments. I want to thank everyone for your time today, and continued interest in Expedia. I’ll now turn the call over to Barry for some closing thoughts ahead of Q&A.

Thank you, and good morning to everybody. I think you all know that companies have cycles. Thankfully we’ve passed through the third cycle in Expedia’s relatively short history. The first, was the takeoff, and for Expedia, was explosive, great growth for its businesses, and of course in its evaluations. The second was the result of having built up the business very quickly, with this tremendous work output by everybody, which is impossible to sustain of course. And of course then with thoughts of turning the results into equity gains from selling the business added to that. Invariably, what this does is take the focus off the business at exactly the time competition grows, and unfortunately for Expedia, this resulted in a lack of investment in both infrastructure and technology. The third phase, which we’ve been experiencing over the last year and a half, has been forthrightly and often painfully dealing with all these issues. These issues required investment retooling and a reinvigoration of the entire enterprise. I believe that Dara and Paul Brown and Dermot Halpin in Europe and their teams have been making the difficult decisions that have been involved with this reinvention of Expedia. And I think that they’re now ready to enter Expedia’s fourth cycle, sustainable growth, over a long period of time. For me, it’s been very frustrating to watch the level of investment behind the scenes that’s going to position the company for the future. Investments can’t be seen on the outside yet, but throughout the course of ’07, we do anticipate that these will be the engine thrusts of really good performance. For now, look to our newly designed homepage, the enthusiastic response to our loyalty efforts, which we’ve just begun, and I think that these are a prelude to a lot of developments that are going to take place throughout the balance of the year. And now I think we go to questions, so Stu, do you want to prompt that?

Absolutely, thanks Barry. Let’s move on to the Q&A portion of the call with Barry, Dara, and Mike. As a reminder, please limit yourself to one or two questions, so we can fit more questioners into the call today. Operator, would you please remind our listeners how to ask a question.

Thank you, Ladies and Gentleman, at this time we will begin the question and answer session. Just a reminder, if you have a question, please press the * key followed by the 1 on your touchtone phone. If you would like to withdraw your question, press the * key followed by the 2. We do ask that if you’re on a speaker phone that you please lift up the handset before making your selection. And our first question comes from Robert Peck at Bear Stearns, please go ahead. Robert Peck - Bear Stearns: Hey guys, congratulations, strong quarter. I just wanted to dig to a couple of the details here. First of all, could you comment a little bit on hotels.com and it seems its growth decelerated to about 12% from sort of the 20% levels. Could you talk about what’s going on there? And sort of bigger picture, how can you accelerate domestic growth? Can you maybe provide a little more color on what’s causing some of the pressure? I just have a follow up. Dara Khosrowshahi: Sure Bob, just on hotels.com, as far as the growth goes, really, the growth that we saw this year, and it was great growth domestically, had two significant factors associated with it. One was the marketing campaign, the expert marketing campaign and the improved homepage design. And the second was the plugging in of hotels.com into the common supply infrastructure that we built, into the PFG group that we built. The plugging in into the new supply got hotels.com much better inventory, better quality inventory, some hotel chains that in the past had not done business with hotels.com. And if you look at the growth rate, and year on year growth rates, once you lap that benefit, once you lap that plugging in, into the new supply, and once you lap… call it an entirely new website, growth becomes a little more difficult to come by. If you look at last year, really the reacceleration of hotels.com started happening in Q4 of last year. We’re lapping those comps right now, so growth going forward is going to be a little harder to come by, but we think that the team over there is very much focused on it. And we think what’s important is that over the long term they can build a brand that thrives, a brand that keeps growing, a brand that amongst consumers if they’re just looking for a hotel. And we think that they’re certainly up for that. Robert Peck - Bear Stearns: Ok, just really quickly as a follow up, during the quarter there was some news flow as American and Delta and supply. Could you just comment a little bit on what exactly was going on there in your accessed inventory? Dara Khosrowshahi: Yea, I don’t want to comment to much on, call it individual relationships with suppliers. Those issues had more to do with connectivity, and specifically our connectivity to those suppliers through Worldspan than specific issues having to do with those suppliers. That said we are in discussion with those suppliers, with both American and Delta about a hopefully long term arrangement with them. And hopefully we can come to a solution that everyone is happy with. Robert Peck - Bear Stearns: Thanks Dara. Dara Khosrowshahi: You bet.

Thank you. Our next comes from Doug Anmuth with Lehman Brothers, please go ahead. Doug Anmuth - Lehman Brothers: Thank you. Michael you mentioned a couple of things that are going to weigh on free cash flow a little bit in 2007 in terms of CapEx and the changes in working capital and the taxes. Could you just provide a little more detail on those? And I’m specifically focused on the changes in working capital with suppliers, and how we should think about that, not just in ’07, but a little bit further, going out a few years. And sort of beyond that, is it generally fair to think that free cash should sort of trend with OBIA? Do you expect to have sort-of further pressures there on working capital? Thank you. Dara Khosrowshahi: Yeah, I think over the long run we would absently expect our free cash flow to, you know, trend with OBIA and the earnings of the business. What we experienced in '06 was a compression in the amount of time that we take to pay our suppliers. We've made significant investments in '06 in improving our infrastructure and taking costs out on the payment-transaction side. That is allowing us, really, to pay our suppliers at the terms which we've agreed to. We're certainly not paying anyone faster than we have to, but we have ended up with lower costs and really better supplier relationships by the investments that we have made. On the cash taxes side, we were a partial cash taxpayer in '06, and expect to be a full cash taxpayer in '07, absent the discrete items which always occur. And so with that expectation, we do expect to see some pressure next year. We also have a payment that we'll be making to Microsoft next year under an historical tax-sharing agreement of approximately $30 million, and that will certainly weigh on free cash flow next year, but will not have any impact on go-forward rates. With respect to CapEx, we expect in '07 to see a much smaller increase than what we experienced in '06. We are investing in our infrastructure. At the same time, we're working as hard as we can to make sure that we don't spend $1 that we don't need to spend. And over time, that CapEx growth rate will return to be much more consistent with earnings.

And Doug, just to clarify, this is Stu, that $30 million will be in 2007. Doug Anmuth - Lehman Brothers: And how does that $30 million... Is that showing up on the income statement? Dara Khosrowshahi: That will not show up on the income statement, but it will be a cash outflow on the cash flow, and it will occur at the end of '07. Doug Anmuth - Lehman Brothers: Okay, thank you.

And, Doug, just on the working-capital side, it's Dara, I just want to stress that the working-capital cycles to some extent have compressed. It is because of our activity and very specific work that we've done, and really upgrading the table of operations of the company. It's work that has taken place over the past two years. It is great work, done by the executive team here, and it's part of our overall efforts at the partner-services group, which just work much more closely with our suppliers, and make sure that we take great care of them. Doug Anmuth - Lehman Brothers: Okay, great, thank you.

Thank you. Your next question comes from Paul King with the CIBC World Markets. Please go ahead. Paul King – CIBC World Markets: Hey, good morning. Thanks for taking my question. So I have a couple of clarification questions on two things that I think Dara and Mike mentioned in their prepared remarks. You'd mentioned that, on the booking fee, you're confident in achieving comparisons in '08 on a non-booking fee portion. So you noticed you left out the booking portion. I was curious how you feel about that long-term? And then the other comment was that the lower margin you mentioned in degradation would likely be second half, not the first half, and does that suggest that there's still hotel contracts out there that above market as you enter the second half of '07?

Yeah, I think on the fee, Paul, we don't anticipate the fee changing significantly over the short term or the long term. That said we are experimenting with it. And one of the real benefits for us as a company is that we're on different platforms, but Expedia especially is on one global platform. And we can experiment with these kinds of aspects of our business, and really test consumer sensitivity to pricing, to fees, etc. And to the extent that we're going to test that, we're not going to do it in the US, where the consequences of testing are much more public, and also, we're talking with bigger dollars. We have in smaller countries. And typically we're doing a lot of our testing in Europe right now. So, we have been doing some experimenting in Europe on booking fees. The results have been very interesting, and in some cases our tests with booking fees have resulted in pretty good volumes in Europe, in certain countries. So, we don't want to. We're not sure where we're going to go long-term as a company. But it's just a real advantage for us to be able to work this way, and experiment across the company, and ultimately to share best practices. Something else, for example, that I didn't mention, on the new home pages on Expedia.com, is that the three-column layout that you see on Expedia.com was actually a layout that was originally introduced in the UK. We introduced that layout, it was very new, other travel websites just don't look like that, and it worked well in the UK. We're rolling it across Europe. The Expedia.com guys in the US decided to use that layout, and early indications are positive. So it's a great strength of the company to be able to experiment there. Mike, you want to talk on raw margin? Michael Adler: Yeah. On raw margin, as Dara indicated, we are in the process of re-negotiating a number of hotel contracts. That will potentially impact '07 results. But we think that the value proposition that we are offering and delivering to our hotel partners is sort-of set at the right economics at this time. However, we can't predict the outcome of the negotiations. So the point is, if there is any impact on raw margin, we would expect to see it later in the year versus the first half.

That said, we feel pretty good about where our negotiations, how they're going with our hotel partners. Paul King – CIBC World Markets: Okay, great, thank you. Helpful.

You bet.

Thanks. Your next question comes from Anthony Noto with Goldman Sachs. Please go ahead. Anthony Noto - Goldman Sachs: Thank you very much. Dara, I was wondering if you could you give us a sense, or Mike, what the net revenue rate would have been relative to a year ago without any change in advertising revenue? And then, I'm not sure if you'll share this with us, but what percentage of your hotel contracts have been renewed in the last 12 months, to give us a sense for how much more there is to go there? And I think that you mentioned that Hotwire's air revenue increased by 1%? I didn't know if you had a perspective on the hotel business there. Thanks. Michael Adler: Anthony, on the raw margins for the media side, it is helping us. I think that it's...my guess is around 20 basis points delta, maybe a little bit less than that, as far as the fact of that business. And it's pretty simple, which is that the advertising business in general is growing faster, call it, than the transactional business. It is close to 100%, call it revenue margin if you want to define it as that. So, that business growing faster helps their overall revenue margins. That said, there are a lot of puts and takes here, Anthony. For example, the faster our corporate business grows, because that tends to have a lower raw margin than the rest of our business. It has a smaller merchant hotel portion. The faster our corporate business grows, the lower our raw margins go. So there are a lot of puts and takes; the media business definitely helps. What was the second question? Anthony Noto - Goldman Sachs: Hotel contracts have been renewed in the last twelve months: what percentage? Michael Adler: We have a number... I'm not going to give you a percentage, but I'll give you an idea. Which is, we do have a number of our larger hotel contracts coming up this year, the big chain contracts. And you've seen some of the results: we saw Shangri-La, etc. Hopefully we'll come up with some pretty good news in the near term on more contracts. So we feel pretty good about it. That said, our relationships with independents are, on an annual basis…we're renewing these contracts with our independents as well. So renewals are going on every day at this company. Okay? Anthony Noto - Goldman Sachs: Okay, great, thank you. Michael Adler: You bet.

And your next question comes from Chris Gutek with Morgan Stanley. Please go ahead. Christopher Gutek - Morgan Stanley: Thanks good morning. A couple of questions. Given the changes in ownership among some of the competitors, specifically more private equity ownership, that would seem to imply the potential for further consolidation in the online travel business. And I’m curious, especially in the context of your last call where you suggested you didn’t have any interest in owning a GDS. If you wouldn’t mind sharing your updated thoughts for the potential for further consolidation and Expedia’s potential to participate in that?

Sure, I mean the movement that we’ve seen, at least in the travel distribution front, really don’t have much to do with consolidation they have to do more with recapitalization. We view it as a positive in that there is some very smart money that is coming in and making long term investments in the travel distribution sector, so we think that certainly is an encouraging sign with our buybacks and taking in 15% of our own equity, you can see that we share in that believe, which is long term that the travel distribution sector is going to grow and we bring a ton of value into the equation. So from that standpoint it's interesting and encouraging. I think what remains to be seen is what effect the private equity activity is going to have on the actual operations of the businesses that have gone private. You know, on the one hand it could be distraction for management. You know, not knowing whether you're public or private or who your owners are going to be. So that could be a positive relative to us. On the other hand, you have management much more focused on running the business rather than the fund that (inaudible) having on these quarterly calls. So that could be a relative negative. You know, all that said, I think we're counting on hefty competition going forward and we're very much focused on growing our business and continuing to expand globally. Christopher Gutek - Morgan Stanley: And a follow up on the first question you guys had. If you look at the domestic gross booking growth trend, it's decelerated for six straight quarters. I would presume that if you strip out the corporate travel business, a quarter domestic leader businesses is actually shrinking a little bit. And I know that you don't want to give specific guidance but when you look at the next couple of quarters, is there reason to believe or be optimistic that that will actually be positive growth in the next couple of quarters in the core domestic leisure business for gross booking's growth?

Well, you know if we do our job then there is reason to be optimistic. I mean, I don't mean to be flip (inaudible) on that. I think we've demonstrated with Hotels.com that we could turn around a good brand and make it a great brand. And with Expedia.com I think that we are essentially working the same play book. It’s about improving the user experience and customer service first of all. Getting better supply, which I think we're working on. AirTran is back in our market place which is great. We just signed a deal with Frontier as well. We've always talked about loyalty as being a potentially interesting factor in these. And we've launched a thank you program which is, we think, much better than your average loyalty program. And then improvements on marketing technology we think are going to yield results. So we internally have reason to be optimistic but we know that we have a lot to prove to you guys. Christopher Gutek - Morgan Stanley: Thanks, Dara.

Your next question comes from Michael Millman with Soleil Securities Group. Please go ahead. Michael Millman - Soleil Securities Group: Thank you. I guess a couple things as well as in line with your discussions about the improving of the site, can you talk about what your trip planning, trip experience initiatives have shown? Also on your Hotels.com you said 50% European growth. Can you talk about whether that's directly comparable to the kind of things that Priceline is doing or is it still with PierOne? And then I have just a quick sort of house keeping question.

Michael, what was at the end of your question on Hotels.com, you said "is it comparable" and then you said something I didn't get. Michael Millman - Soleil Securities Group: Okay, Priceline has been showing these 100% growth rates. A lot of that having to do with, as you well know, second tier hotels. So I was wondering if your Hotels.com growth is {inaudible} (3:41) in first tier, second tier...

I see, let me take your first question on the trip planning, trip experience. I think it's too soon to tell for us. If you look at the new site, it does create the impetus for our travelers to experiment, to explore a bit more which something that we're encouraging. One, because it’s a good experience for the travelers. It encourages them to come to Expedia much earlier in their planning process rather than call it when they decided whether they're going to go and buy. And in general, our investment in content, our investment in TripAdvisor, and we think our continued investment in the content and media space are going to be designed and moving upwards in the traveler consideration, so to speak. So we're optimistic about it. But I think it's too early for me to give you specific results. On Hotels.com, the business is obviously growing in the EU nicely but we are still behind the kind of growth rates that Priceline has put up there. And we don't know exactly what the distribution of their growth is as far as in, call it, primary and secondary cities. We do believe that we have a greater concentration in larger tourist destinations in the continent…The type of destinations where you got international travelers going at the percentage of our business overall. So we think that the secondary cities are a real opportunity. We obviously haven't solved that opportunity and we haven't, call it, penetrated those secondary cities the way that Priceline has. And we have the management team in Europe who is more than competent, who is very much focused on what Priceline is doing and is focused on catching up to those guys. Michael Millman - Soleil Securities Group: Okay, and a quick question. You show $46 million revenue, non-transaction. Should we assume that that's advertising and/or TripAdvisor? Or is it something else?

Sorry Michael. Can you repeat the dollar amount? Just not sure where you came up with that. Michael Millman - Soleil Securities Group: I subtracted your transaction revenue, the domestic and international revenue from your total $531 million revenue.

Those should add. Domestic revenue was $368 million for the quarter and international was $164 million. But is there something maybe at the core of your question around advertising we could perhaps address? Michael Millman - Soleil Securities Group: Well I guess I was looking for how much advertising…and what the revenues for advertising are? And what the revenue is for trip advisor work?

Now that's not something we're going to get into a tremendous amount of detail on. I would just reiterate what Dara said earlier around the year on year change in revenue margin would have been a little less than 20 basis points more had we not had the benefit of that advertising. Can we have the next question please, Operator?

And your next question comes from Scott Devitt with Stifel Nicolaus. Please go ahead. Scott Devitt – Stifel Nicolaus: Thank you. As I look at Priceline, TravelPort, and Travelocity over the past 18 months, it seems like Expedia has been losing share to competitors over that time horizon. I was wondering if you could talk about your longer term ambitions and strategy in terms of market share versus cash flow maximization in specifically 2007 and 2008? Thanks.

I think you have to balance both share and cash flow maximization. You know, in the end, and I'd say in the final say, we are focused on cash flow maximization. However we are keenly aware that that share has a ton to do with the long term prospect of the company so it's a trade off that you do look at and we're certainly not happy about losing share to our competition. You know, that said, the majority of our share loss has been domestic. I think international we certainly have Priceline that's growing very very quickly but compared to basically all the other competition out there in the international market places, we're growing very well. We're executing very well. We're starting to make significant investments in the Asian-Pacific region which aren't going to return, call it, big share dollars early on but we think are the right long-term investments to make. If you do look at the domestic business and what’s going on there, I do want to point out that part of the domestic results are as a result of capital allocation decisions that we've made. We determined around a year and a half ago that we needed to make some very fundamental platform investments in the Expedia platform in order to position us to grow for the long term. So to some extent we took capital that we might have been spending on marketing and we shifted that capital to spend in technology in infrastructure. That's the reason why you see the CapEx numbers for the company going up pretty significantly and to the extent that we were investing incremental doc (inaudible) marketing, we took most of those dollars off-shore. We took most of those dollars to the international markets. We took some of those dollars into the Asian-Pacific regions. We invested some of those dollars in the corporate business that we're very hopeful of. So we could have, if we wanted to operate Expedia.com domestically and see higher gross bookings growth and less share losses. But we thought from a capital perspective, the decisions that we make are sound decisions. What you will see in 2007 and 2008 is a shift of incremental capital back into the Expedia.com brand. You’re going to see that in Q2 especially compared to what we saw last year which is why Mike was saying that Q2 was going to be incrementally more difficult from a bottom line standpoint. So these are capital decisions that we’re making. We’re not satisfied with our share results but they are the results of capital allocation decisions that we are making. Scott Devitt – Stifel Nicolaus: And then separately, could you give us the cash tax rate of the business in 2006 and then what you expect it to be in 2007.

The cash tax rate in ’06 was in the mid to high 20’s and we expect it to approach our A&I tax rate of 36-37% on a go forward basis. Scott Devitt – Stifel Nicolaus: Thanks.

Thank you, and the next question comes from Mark Mahaney with Citigroup. Please go ahead. Mark Mahaney - Citigroup: Thank you, two questions. The transactions growth rate did moderately re-accelerate in the December quarter but I think it’s probably below where you’d like it to be. Would you want to give us a range of where you think you’d like to see sustainable transactions growth going forward? And then secondly could you give us a quick a quick update on your options in China with eLong and any thoughts on what you want to do with that over the next 12 to 24 months? Thank you. Dara Khosrowshahi: You bet, Mark. I don’t think we’re going to comment on a long term sustainable transaction growth other than saying that we’re hopeful that it gets better from here. As far as the eLong option in China, we do have an opportunity to buy in the balance of eLong. I don’t think it’s something that we’re going to do in the short term. We think that eLong is very much a local business in China and we want to make sure that we’ve got local management who is very much (inaudible) on how they build that business and what they do from a day to day stand point. We think it’s a good thing and so we expect to remain where we are for the near term. Mark Mahaney - Citigroup: Thank you. Dara Khosrowshahi: You bet.

Thank you. The next question comes from Aaron Kessler with Piper Jaffray. Please go ahead. Aaron Kessler - Piper Jaffray: Thank you. A couple of questions. Firstly, please give a sense of where your raw margins are internationally, and if you think that those are sustainable or those are going to have to come down over time similar to the U.S market? Also I know on the pricing cap, merchant load factors are becoming more favorable on the airlines for them. I’m not sure if that’s just more the naming of their own price model or if you’re seeing that as well in terms of load factors becoming more favorable to your model? Thank you. Dara Khosrowshahi: Sure. I’ll answer the second question first, as far as merchant load factors. We’re seeing similar signs at Hotwire that I think Priceline referenced. Obviously we don’t have a good view into their business but we did talk about how Q4 revenues at Hotwire improved and we’re certainly seeing early trends in ’07 at Hotwire that are encouraging. So I think you’re getting to a point right now where airlines are continuing to try to push up price. There does seem to be some resistance from consumers out there and it remains to be seen how that plays out, but in that kind of an environment the opaque channel does become an incrementally more interesting channel and we’ve seen a bit of that. So we’ll see how it goes. We’re encouraged by the early results. Mike, do you want to talk about international margins? Michael Adler: Yes. Over the long run we think that international margins at a higher level than domestic is sustainable and it’s due in large part to the increased level of fragmentation of the supply base internationally. At the same time, we will continue to experience pressure on air revenue per ticket margins and again that will be counteracted by the fragmentation of the supply. Aaron Kessler - Piper Jaffray: Some of your competitors though, are offering closer to a mid-teen raw margin internationally. Is that going to be a competitor pressure or with your scale are you able to get a higher margin than that? Michael Adler: Oh I think that Aaron, it’s a question of scale and also scope. So scale certainly has something to do with it in terms of the amount of business we can bring to our partners and the consistency of the demand that we can bring to bear. The other is the scope, in that we are a truly global market place. As in any market place, the higher field the transaction, the more valuable that transaction is. A consumer traveling in the US from New York to Boston, to the extent that you can you think of a marketplace…that connection is going to be worth less than a consumer flying to Mumbai in India. Our ability to connect consumers, not only locally but globally, makes us a bit of a different animal and it kind of enables us to offer a unique value proposition verses certainly travel companies that have been around in the past and most travel companies that you see now. The global systems that we have are truly integrated. We have one partner supply group who is having discussions with her supply partners on behalf of the company on a global basis. It is a differentiator. Great, Thank you.

Our next question comes from Imran Khan with J.P. Morgan. Imran Khan – J.P. Morgan: Hi, thank you for taking my questions. Two questions. Firstly, in terms of an international growth rate, I was wondering if you were saying a growth acceleration of every country or if any specific country is doing better than others? Second, if we exclude the Microsoft MSN traffic lost year-over-year, can you give us some sense how’s the traffic doing for Expedia and what are the conversion rates for Expedia traffic. Thank you. Dara Khosrowshahi: On international, the results that we saw, the positive results, were pretty broad. So, I’d say almost all those across Europe, we had good performance. I would single out Germany and Italy and the Hotels.com brand across Europe as being particularly strong the corporate business did quite nicely as well. But the strength was fairly broad. You should also note that FX looked pretty good and that certainly helped. On the MSN side, I don’t want to specifically comment on the size of MSN or the percentage of the whole. That said, it was material and if you look at the issues that we’re having as far as gross bookings right now, it has more to do on Expedia side with traffic more than with conversion. So conversion rates are pretty stable. We’re not having conversion problems. And with the ThankYou program and some of the other programs that we have in place, we’re actually hoping that we can move conversion up. It’s really more about investment and marketing spend to get travelers, new consumers to a site and that’s what we’re very much focused on for the balance of ’07.

Thank you. We have time for one final question and that question comes from Scott Kessler with Standard and Poor’s. Scott Kessler – Standard and Poor’s: Thanks a lot. Most of my questions have been asked and answered, but I did have two related to Europe. First of all, is there any way you could detail what percentage of your either overall revenues or your international revenues were derived from Europe? And also, relative to that geography, can you talk about what you think the major drivers of your potential share gains will be say in 2007 for example? Thanks Dara Khosrowshahi: You bet. I think that the vast majority of our international revenues were from Europe of any of our APEC businesses. I’m getting a number 75% of our international revenues roughly being from Europe. Asia Pacific revenues are obviously pretty small to start with, is half in scale, their, Australia, Japan, etc. have a fairly long way to go. As far as the drivers for Europe, it’s continued execution across the European territories. One thing that we are doing differently in Europe this year than we did last year, we are going to investing incrementally more brand money and some of the secondary territories. We're going to be spending some branding money on the Hotels.com brand. We have started on that and it's too early to tell but the results seem to be promising. We are going to be putting some more branding money against the Expedia in France, and Expedia in Germany, and to some extent in Italy as well. So, that may be part of again the bottom line pressure that you see in Q2 but we think that with the mix of, call it, tactical and more strategic branding moneys, we should be and we are investing in the Expedia and Hotels brand in the EU and we hope to see the returns of that investment in kind of quarters in years to come. Scott Kessler – Standard and Poor’s: Great. Very helpful. Thanks Dara.

You bet, Scott. I think that's it for questions. Michael Adler: Okay I just have one more clarification, Dara. Sorry, from someone who had emailed in a question on where that $30 million tax payment to Microsoft would appear in the cash flow statement? It would be in cash flow from operating activities. I just wanted to clarify that.

Okay, well thank you everyone for joining our call. I did want to say a special thank you to the employees of Expedia this year. I think that this year we made real progress during the year. I've been on my job for two and a half years and I've never seen our employee population working as hard as they are now. And the passion that they're putting into the business and the hope and the optimism that I see, really gets me excited to come to work everyday. So a special thank you to everyone who is working as hard as they are right now. And with that, thank you.

Thank you. Ladies and gentleman that will conclude today's teleconference. We thank you for your participation and at this time you may disconnect.

Company sponsors partner's transcript: Company sponsors competitor's transcript: Issuer-sponsored research firm sponsors client's transcript:

IR firm sponsors transcript of micro-cap company: Consulting company sponsors company's transcript in sector of interest: Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details.