Jeff Boyd – President, CEO, Director Bob Mylod - CFO

Jen Watson – Goldman Sachs Chris Gutek – Morgan Stanley Aaron Kessler - Piper Jaffray Justin Post - Merrill Lynch Brian Fitzgerald -Banc of AmericaSecurities Mark Mahaney -Citigroup Bridget Wyshar - JPMorgan Jake Fuller - ThomasWeisel Partners

Welcome to Priceline's third quarter 2007 conferencecall. Priceline would like to remindeveryone that this call may contain forward-looking statements which are madepursuant to the Safe Harborstatement provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are notguarantees of future performances and are subject to certain risks,uncertainties and assumptions that are difficult to predict. Therefore, actual results may differmaterially from those expressed, implied or forecasted in any suchforward-looking statements. Expressions of future goals and similar expressionsreflecting something other than historical fact are intended to identifyforward-looking statements. For a listof factors that could cause Priceline's actual results to differ materiallyfrom those described in the forward-looking statements, please refer to theSafe Harbor statements at the end of Priceline's earnings press release, aswell as Priceline's most recent filings with the Securities and ExchangeCommission. Unless required by law, Priceline undertakes no obligationto update publicly any forward-looking statements, whether as a result of newinformation, future events or otherwise. A copy of Priceline's earnings pressrelease, together with an accompanying financial and statistical supplement, isavailable in the investor relations section of Priceline's website, located atwww.priceline.com. Now I'd like to introduce Priceline's speakers for thisafternoon, Mr. Jeff Boyd and Mr. Bob Mylod. Go ahead, gentlemen.

Thanks very much. Welcome to Priceline’s third quarter conference call. I’m here with Priceline CFO Bob Mylod. Priceline reported gross bookings for thethird quarter of $1.4 billion, up 54% year over year. This represents a significant increase in thegrowth rate from 33% in the second quarter which is attributable to continuedhigh growth rates in Europe and a significantimprovement in domestic bookings growth. These trends contributed to sequential accelerating growth in both pro formagross profit and pro forma net income. Pro forma gross profit of $202 million was up 65% in the third quarterversus up 46% in the second quarter; and pro forma net income was $71.5 millionor $1.58 per share, up 119% over last year versus up 102% in the secondquarter. Third quarter results showed good earnings leverage in boththe domestic and international businesses, and again surpassed the high end ofour guidance. Priceline’s gross bookingsgrowth rate was driven by a 98% growth at booking.com, which again exceeded ourgrowth expectations in the third quarter, and by a turn around in domesticgross bookings from down 4% in the second quarter to up 19% in Q3. Bottom line over performance was attributableto bookings growth at booking.com. Growth in domestic merchant bookings of 15% and expenseefficiencies. We believe that booking.com is benefiting from positivee-commerce and travel market trends in Europe,integration activities, good performance in new markets, and strong managementexecution. Booking.com now hasapproximately 38,000 hotels in 60 countries. Our international supply team has quickly strengthened supply in coremarkets and rapidly established the presence in many new markets in Europeand beyond. We also announced during thequarter a marketing partnership between booking.com and KLM, underscoring thevalue of our inventory and content. We were pleased to announce today our acquisition of Agoda,an Asian online hotel business that will be an important part of our expansioninto Asia. WhileAgoda is relatively small today, we believe there is an opportunity to buildingin the region with Agoda by using our worldwide inventory and demand and knowhow to offer the most complete and compelling inventory and content tocustomers traveling in Asia. Agoda will operate with its independent management structureas part of our international business and we expect that our international andUS teams will help Agoda build its business. We are very pleased to welcome Michael Kenny, Rob Rosenstein and theAgoda team to our worldwide hotel business. As foreshadowed in our previous guidance, gross bookings forPriceline’s domestic business showed significant improvement from the priorquarter due to increased retail airline ticket sales under our no-fee promotionand increased merchant sales. Despitethe lingering impact of losing Orbitz, we reported a 24% increase in domesticpro forma gross profit, as the growth in our domestic hotel and rental car businessesovershadowed the loss of margin associated with dropping the retail airprocessing fee. The growth in gross profit, together with the benefit ofexpense efficiencies, contributed to domestic earnings growth at the highestlevels achieved this year. We arepleased with the momentum our domestic business showed in the third quarter andannounced recently that the retail airline ticket fee waiver was being madepermanent. We believe this will continueto promote good site conversion, provide new marketing opportunities as theticket shopping landscape changes and ultimately strengthen our value brand. I want to mention a few items on the USsupply front. Priceline now offers over55,000 hotels in its USprograms. In the last several months,Priceline has concluded participation agreements with American Airlines, DeltaAirlines, and Continental Airlines, supporting both our retail and [OPEG]services. While we have the leanestsupplier relations staff of the major companies in this space we believe ourhotel, air and rental car teams are clearly doing a great job of energeticallypromoting the value of Priceline’s low cost distribution and revenue managementbenefits to our travel partners. Priceline’s global hotel room night sales for the thirdquarter exceeded 7.9 million room nights, an increase of 52% over last year, withpositive organic growth trends domestically and continued high growth ratesinternationally, our intention is to build on our leadership position andworldwide hotel sales through investment in people, product, marketing andgeographic expansion. With the Agoda transaction, we can now extend our focus inthe large attractive Asian market. Weare now addressing a number of markets that are undergoing unprecedentedexpansion of economic activity, Internet usage and travel. Our international hotel business has thesupport of major brands and extensive hotel supply and customer flows in the United States and Europe anda growing source of supply and customer flows in Asia. While the standalone performance of these businesses hascreated significant earnings growth, I believe more can be accomplished wheneach region is more extensively leveraging the assets of the other regions. I will now turn the call over to Bob for the financialreview.

Thanks Jeff. Thirdquarter of 2007 was another strong quarter, our seasonally strongest, duringwhich we set new all-time quarterly records for gross bookings, gross profit,EBITDA, net income, and earnings per share. Internationally, booking.com once again turned in gross bookings growth thatsignificantly exceeded our expectations, driven by increasing repeat rates,brand awareness and conversion rates and steady gains in our worldwidesupply. The growth was additionally fueled by continued strength inhotel room night unit prices, which were up approximately 5% year over year, aswell as by continued strength of the Euro and the Pound relative to thedollar. All of these factors combined togive us gross bookings growth at booking.com 97.9% which for the secondconsecutive quarter actually represented a quarterly sequential increase in theannualized gross bookings growth rate. We continue to make very significant investments in peopleand infrastructure at booking.com and those investments are ongoing. Despite those costs associated with theseinvestments, booking.com demonstrated continued operating leverage in thequarter, which drove record profits. In the United States,all of our financial metrics came in well above our plan. From a top line perspective, we continue tohave difficult top line comparables due to the elimination of our marketingdeal with Orbitz this year; however, despite that headwind, we think that ourdomestic business turned in market leading growth in gross bookings due to thepositive customer response to our no fee retail airline ticket initiatives andthe continued momentum in our merchant products. This continued growth in our merchant businesses droveincreased gross profits and gross margins that more than offset the modestgross profit declines associated with the no fee initiative and from an expenseperspective, we continue to benefit from the domestic expense disciplineprograms, especially as it relates to advertising and marketing that welaunched about this time one year ago. As a result, the USbusiness demonstrated even more operating leverage than our European business,thereby causing our USoperating income to increase on a year over year basis by several multiples of ourUS grossbookings growth rate. I won’t go into each line item of the P&L as I thinkthey are very well covered in the press release and our staff supplement, butthe general take away is that we did substantially better than forecast withrespect to gross bookings revenue and gross profits and most of our operatingexpenses. I will point out that we had several negative expensevariances relative to our forecast, but all of the negative expense varianceswere driven by factors that drove our profits upward. Specifically, our personnel expenses came inhigher than forecast because we accrued higher than expected performance-basedemployee bonus expenses due to the large upside in operating profits during thequarter. Second, our pro forma income taxexpense came in higher than our prior guidance due to the strong pretax incomeperformance in Europe where our NOL’s do not apply andwhere we are a tax payer. Finally, weincurred approximately 1.4 million dollars of losses associated with foreignexchange hedging activities due to the increase in the value of the Euro andthe pound, the two principal foreign currencies with which we transact in Europe,relative to the dollar. These losses were more than offset by favorable FX earnedtranslations for our European operations which flowed through each line item ofour income statement. As I mentioned earlier, our European gross bookings metricwas positively impacted by FX in the first quarter and our statisticalsupplement shows our European gross bookings growth rates on a local currencybasis. From an EPS perspective, the onlyother negative variance relative to forecast was in our share count. Our pro forma diluted share count increasedby 8% on a year-over-year basis which was higher than expected due entirely tothe significant increases in our stock price which we have experienced as oflate and which has resulted in an increasing amount of shares associated withour convertible debt to be counted in our diluted share count. Despite this head wind, we reported pro forma net income of$1.58 per share which, as Jeff mentioned, represented 119% year-over-yeargrowth and [inaudible] both ourguidance and First Call estimates of $1.28 per share. We reported gap net income of $2.27 per share, up 116%versus last year and substantially higher than our $.90 to $1.00 guidance. The gap results were favorably impacted by anadditional $47.9 million reversal of the balance sheet reserve that we havewith respect to our deferred tax asset which reflects our growing optimismabout our ability to generate sustained U.S.pretax earnings which would allow us to utilize a greater percentage of oursignificant NOL asset. As was the caseboth last year and the year before, we’re eliminating this positive impact fromour pro forma EPS because the benefit is non-cash in nature and will only berealized as we generate future taxable income within the United States. On a go-forward basis, our gap net income will continue tobe reduced by income tax expenses that will be booked against the deferred taxasset. Both the increase in gap netincome this quarter as well as the decrease in gap net income in subsequentquarters from income tax expense will be non-cash in nature. Accordingly, as has been the case for manyquarters, we intend to continue to report pro forma net income on a cash taxbasis and this event that I have described will have no impact on either ourhistorical or projected pro forma earnings. All of the other pro forma adjustments to our P & L andshare count were generally consistent with our prior guidance. As for cash and cash flow, we generated approximately $61.7million in operating cash flow during the quarter, up 77% year-over-year. The growth in cash flow lagged the growth inearnings due principally to the seasonal buildup receivables associated withour European hotel commissions. Q4 isthe quarter during which most of the commissions generated in Q3 will becollected, so we expect that there will be a roughly reciprocal impact in therelationship of operating cash flow to pro forma earnings in Q4. In other words, we expect that operating cashflow will exceed pro forma net income in Q4, thereby bringing our second halfoperating cash flow to roughly similar levels as our second half pro forma netincome. As for our cash balances, we began the quarter with $451.6million of cash and marketable securities and we closed the quarter with $518million of cash and marketable securities, representing a $66.4 millionincrease. Total capital expenditures in the first quarter wereapproximately $5.5 million. This amountincludes all monies spent on capital equipment and internally developedsoftware. And finally, with respect to our balance sheet, I wanted tohighlight that our current accrued liabilities increased due to a $61 millionpayable associated with the buy back of minority interests in our principalinternational subsidiary during the quarter. The actual cash payments for the buy back occurred in October, so in Q4you will see a decrease in this liability along with a decrease in cashassociated with the payments. And now for a few comments on guidance. We’re looking for fourth quarter bookings to grow byapproximately 50% on a year-over-year basis with international gross bookingsfrom Booking.com growing approximately 90-95% on a year-over-year basis anddomestic gross bookings growing 15-20%. We expect pro forma revenue to grow by approximately 22-26%on a year-over-year basis. We expect proforma growth profit dollars to grow by approximately 50% on a year-over-yearbasis. As for Q4 operating expenses, we’re targeting consolidatedadvertising expenses of approximately $51-54 million with approximately 85-90%of that amount being spent on online advertising. We expect sales and marketing expenses of between $12.5million and $13.5 million. We expect personnel costs, excluding stock-basedcompensation, to come in between $23 and 24 million. We expect G & A expenses of approximately $10-10.5million, information technology costs of approximately $4.2-4.5 million, andappreciation and amortization expense, excluding acquisition-relatedamortization, of approximately $3.6 million. We expect total below-the-line positive impact ofapproximately $1-1.5 million, which comprises net interest income, foreignexchange expense, equity and income of Priceline Mortgage, and minorityinterest expense. We’re targeting pro forma EPS of approximately $.77 - $.85per share and our pro forma EPS forecast includes an estimated cash income taxof approximately $8 million, comprised of alternative minimum tax in the United States and income taxes in Europe. Our pro forma EPS guidance is based on a pro forma dilutedshare count of approximately 47 million shares which is based on last night’sclosing stock price of $90.31 per share. This share count represents a substantial increase on both an annual andquarterly sequential basis due to the increase in Treasury stock methods sharesassociated with our convertible debt caused by the substantial increase in ourstock price. As for expected gap results, we expect to report a gap EPSof between $.51 - .59 per share. Thedifference between our gap and pro forma results will be driven primarily bythe inclusion of acquisition related amortization, stock based compensation,and certain income tax expenses, all of which are non-cash in nature. Gap results will also be negatively impactedby the inclusion of approximately 1 million shares of additional unissued commonstock associated with our convertible note offering that is fully hedged, butthat we are required to use in the calculation of gap EPS. We are not, at this point, giving specific guidance for2008. Our plan is to do that when weannounce our Q4 results next February. However, I did want to offer a few qualitative comments that willhopefully assist analysts and investors who are working on their own earningsprojections for Priceline in 2008 and beyond. The first has to do with top line growth. As Jeff mentioned in his remarks, we thinkthat we have reason to remain optimistic that we can continue to delivermarket-leading gross bookings growth rates in the coming year and one reasonhas to do with simple math. Specifically, over the past couple of years, our gross bookings fromBooking.com have grown from being a relatively small fraction of ourconsolidated gross bookings to a point that Booking.com now represents amajority of our consolidated gross bookings. Given the growth rates that we have experienced and continueto experience at Booking.com and given our continued commitment to theinternational arena as evidenced by our acquisition of Agoda today, we expectthat the mix of our business will continue to become increasingly skewedtowards internationals. Having saidthat, I’ll repeat a statement that we’ve been making for several quartersnow: namely, that our internationalbusiness has become a very big multi-billion dollar gross bookings business andthe law of large numbers inevitably dictates that our international grossbookings comparables will be more difficult in 2008. Again, it is our hope that the impact that these declineswill have on our consolidated gross bookings will be tempered by the mixedpoint that I just made, but you should expect our gross bookings forecast for2008 will call for significant declines in the international gross bookingsgrowth rates as compared to 2007. Secondly, due to the continue growth of our hotel serviceson a worldwide basis, we expect an increasing amount of our gross profits to begenerated by hotel. However, whenlooking at gross profit expressed as a percentage of gross bookings, we thinkthat the positive impact that we should see on this metric from this mixedshift towards hotel will be offset by a countervailing mix shift toward agencybookings, which are expected to grow at a substantially faster rate than ourhigher margin merchant bookings. This is particularly true with respect to ourno fee retail airline ticket service in the US,which is our lowest margin service and which is expected to deliver significantyear over year growth in gross bookings in 2008. Third, as I have mentioned many times on previous calls, allof our financial metrics have been positively impacted by the very strongappreciation of the euro and the pound relative to the dollar. Our policy hasbeen, and continues to be to not pursue any long-term hedging activities withrespect to foreign currency. With an ever increasing majority of our profitsdenominated in foreign currency, our profits will become increasingly subjectto changes in FX. Fourth, with our stock now trading well above the conversionprices of our convertible bonds some of the holders of our convertible bondsmay elect to convert their bonds prior to their maturity date. And in fact, wehave seen a small trickle of this activity already. This activity is very hardto predict but I did want to point out that our net interest margin couldpotentially be impacted by this activity to some degree in 2008 and beyond. Fifth, I spoke earlier about the great operating leveragethat we have achieved in 2007 with respect to our USbusinesses. This was due to the improvements and marketing efficiencies broughtabout by the elimination of the Orbitz relationship and the tightening of ROI standardswith respect to our online ad spend. With those efficiencies now accomplished,in 2008 it is our goal to maintain those operating leverage metrics.Specifically, we expect that our operating profits will grow at roughly thesame rate as our gross profit in the US.As for our international business, we expect to continue to invest heavily inpeople, infrastructure, and of course marketing. One of the big wildcards that impacts operating leverage hasand will continue to be the cost of customer acquisition. Our assumption hasalways been, and will continue to be, that the market will get increasinglycompetitive with respect to online spend. And I’ll caveat that by pointing outthat we have not yet seen anything in our current business trends that point tosignificant upward pressure in our cost of customer acquisition, and we areconstantly working on conversion initiatives to offset this pressure if andwhen it comes. But investors should expect that our forecast will call forincreased customer acquisition costs in 2008, which could put slight downwardpressure on our international operating leverage in 2008. Lastly, international operating leverage will be negativelyimpacted by the results of Agoda. Agoda is basically in a breakeven position asof now from a profit perspective. We expect Agoda to turn a pro forma profit in2008; however, Agoda is also in a very steep growth curve in terms ofinvestment. So while Agoda will be neutral to slightly accretive to earnings weexpect that Agoda will have a slight negative impact on our operating profitexpressed as a percentage of gross bookings and gross profit. As for taxes, we continue to expect that our effective cashtax rate will increase in 2008 compared to 2007, as our foreign sourcedearnings, which do not benefit from our NOL tax shield grow at a faster ratethan our domestic earnings. Lastly, as I have discussed exhaustively in previousearnings calls, our diluted share count has and will continue to be affected bythe inclusion of additional shares associated with our convertible debt; theamount of additional shares is in turn directly impacted by movements in ourstock price. We have updated the grid in our statistical supplement to showinvestors what our potential pro forma diluted share counts would be for Q42007 and full year 2008 based upon various hypothetical stock prices. As we’vesaid in prior calls, we’re not going to get into the practice of predicting ourown stock price but we hope that this detailed data gives investors who havetheir own price targets a guidepost that they can use to forecast our pro formaEPS on an ongoing basis. Finally, I’ll point out as I’ve done on previous calls, thatall of our forecasts are based upon an assumption that we’ll continue operatingin a consumer travel market that is roughly similar to the current one. And anyterrorist event, particularly within the United States or Europe,would in all likelihood have a negative impact on the travel market in generaland our operating results in particular. And with that I would be very happy to answer yourquestions.

(Operator Instructions) Our first question comes fromAnthony Noto - Goldman Sachs. Your question please. Jen Watson – GoldmanSachs: This is actually Jen Watson in for Anthony. Can youelaborate a little bit on the trends you’re seeing domestically acrossdifferent products – hotel as well as airline? Obviously the 23% year over yeargrowth in airline tickets and the accelerations in gross bookings would suggestyou guys are gaining share. But if you could just talk about that a little bitmore that would be great.

Sure. I think that the gain in retail airline tickets speaksfor itself. We also showed a 15% increase in merchant gross bookings, which wethink shows nice momentum in those products. The only other comparables we haveout there in terms of gaining shares is Expedia, which it looks like they alsohad a good quarter domestically; our airline ticket business grew a little bitfaster but you have to keep in mind that we’re very, very much smaller thanthey. But we certainly don’t think that we lost share in these products. Jen Watson – GoldmanSachs: Have you guys done a lot of marketing around the no fee oris it kind of a word of mouth? And are you seeing people come to the site forretail and booking merchants?

Well we had some marketing around no fee back in the summerwhen we launched it as a promotion but we haven’t done any real offlinemarketing or specific online marketing since then. We certainly have the no feefeature prominently displayed on the website and I think that helps ourconversion. We also have historically seen people come in and shop for retailairline tickets and either move on to other things like a merchant product or apackage but we also encourage people who buy retail airline tickets to also buya rental car, for example. So all of those are things that we continue to tryto do now that the sales are moving up here a little bit. Jen Watson – GoldmanSachs: Great, thank you.

Thank you. Our next question comes from Chris Gutek - MorganStanley. Your question. Chris Gutek – MorganStanley: Hi guys, nice quarter. Just to talk a little bit on thebooking fee situation, it seems to be a bit of a reversal from your comments onyour second quarter call where you seemed to suggest that the elimination ofthat high margin revenue stream was not a particularly good tradeoff versus amodest boost to volume, but now you’ve obviously taken a different view,permanently eliminating. Could you elaborate behind the strategy there?

I don’t think that anything we said in the second quarterwas intended to do anything other than communicate in response to a specificquestion whether the uptake in volume had paid for the money it cost in takingthe fee out. We said then that it did not if you look at it very specificallytransaction to transaction. Our observations over the course of the time that we’ve beenoperating with no fee is that we’ve certainly seen an increase in conversion,which has turned around a sort of continuing to climb in airline ticket salesfor us. We’ve been satisfied generally with the operating momentum of thedomestic business as a whole while we’ve been operating with no fee. Finally,we’ve conclude that having generally lower prices than the other major OTAs isvery consistent with our brand positioning and good for the long term health ofour brand. Chris Gutek – MorganStanley: It makes sense. I guess to put more color around it couldyou give us a rough sense for the US Air product prior to the elimination ofthe booking fee, roughly how much revenue and profit you were getting? And thenmaybe to expand the discussion a bit into Europe since some of your competitorsseem to be eliminating some booking fees in Europe; if that pricing pressurespreads globally, how much revenue and profit are you currently getting frombooking fees in Europe that would be at risk if that got eliminated?

Well I’ll answer the second part first which is we don’thave booking fees in Europe, that’s one of several reasons for why we think ourproduct is doing so well over there. As for the specific profitability of ourairline ticket business Chris, we don’t break out profit by product. Again,just to elaborate on what Jeff said, if you look at the pure economics ofswitching to no fee, and I’ll reiterate what I said on the call, it certainlyprobably cost us a little bit of money. Said differently, we didn’t sell enough tickets to offsetthe loss in fee, but I think we took the view that that loss was modest enoughrelative to what we thought. It was a very important brand positioning point. Wehave always tried to stake out Priceline as trying to own the value categoryand we think that move was very consistent with that. So, for us, it was aninvestment worthwhile relative to that brand positioning. Chris Gutek – MorganStanley: The merchant growth was very strong in the quarter, and Iguess it’s not completely clear to me why we saw such a big improvement. Iwouldn’t think the elimination of the bookings fee would necessarily drive muchbetter merchant business?

I wouldn’t necessarily connect one with the other. We havehad good momentum in our merchant hotel and rental car products now for severalquarters. They’ve been performing consistently well and growing nicelyorganically. I think that really is the trend that you’re seeing.

I think it’s similar to the point I made in my preparedremarks about just mix. Over many years now, the rental car and hotelbusinesses have been growing at a much faster rate than, in some instances, ourdeclining merchant airline ticket business. And as those quarters progress, thecomps have gotten easier from a mix perspective. I agree with Jeff, we don’t really think it’sdriven so much by the tie-in with no fee as much as it by just the very goodexecution of those two products generally.

Thank you. Our next question comes from Aaron Kessler, PiperJaffray. Your question, please? Aaron Kessler - PiperJaffray: Great quarter, guys. A couple of questions. First, on the Agodabusiness, can you give me the sense for what practices you can take that you’velearned from Booking.com and apply them to Agoda? Also, are all the revenuesagency-based there and which countries are they strongest in?

Why don’t I hit the first one and I’ll let Bob do thesecond. In terms of business practices, it’s really not so much a function ofpractices as it is a function of giving them access to added customer flows whoare looking for hotels in Asia that they can book forthem. And so, Priceline has a lot of customers in the United States and inEurope who are interested in travel to the region and now we’re just going tohave a lot more hotel inventory to show them as we progress with theintegration. By the same token, they have growing customer flows in Asia that are not only interested inAsian hotels, but interested in travelto Europe and the United States and we think we have, you know, leadinginventory to help them convert those customers. We’re certainly going to try tohelp them on the IT front and marketing and all the various business practicesthat we have, but they’ll also have to make sure that they’re taking thosethings and shaping them and tailoring them so that they work in the Asianmarket.

In terms of how we are going to report their revenue, theyare a merchant and they operate under the merchant model, so you will see theAgoda revenues and gross bookings appear in the merchant line item. As far asspecific countries, we’re not going to get into specific exposure to thespecific countries other than to say that they really operate on Pan-Asianbasis. The business is headquartered in Thailandand has a significant presence also in Singaporeso those are two important countries, for instance, but I wouldn’t want toleave people with the impression that those are the two countries. It’s reallyon a Pan-Asian basis with which would include, ultimately, we think China wherewe already have a presence there and, hopefully, that’s going to be animportant part of our growth story on a going forth basis. Aaron Kessler - PiperJaffray: Bob, do you happen to have the international agency revenuegross profits? In terms of investments in Europe, Imean, at what point do you become too profitable, that your margins are toohigh and you maybe say, okay, it’s still a big opportunity, we need to increaseour investments there. Robert J. Mylod -Chief Financial Officer: I think we’re going to be in the mode of investing for sometime to come in the international business and it’s not just in Europe,it’s in other geographic regions. Ithink we have a business that’s growing very rapidly and you tend not to beable to hire people as rapidly as you like. It’s difficult to make all theinvestments you want to make, so I don’t think we’re going to get to a decisionpoint around whether we’re investing enough until we get to the point where we’rereally comfortable, that we’re able to make all the investments we want tomake.

And then, international revenue, Aaron, $131.8 million inthe quarter and gross profit of $130.9 million. Aaron Kessler, PiperJaffray: Do you happen to have the agency’s part of the internationalor I guess it is all agency, right?

All agency. Right.

We have a tiny, tiny bit of merchant associating at thePriceline brand, but it’s mainly the Booking.com brand. Aaron Kessler, PiperJaffray: Got it. Thank you. Good quarter.

Thank you.

Thank you. Our next question comes from Justin Post -Merrill Lynch. Your question, please? Justin Post - MerrillLynch: Thanks for taking my question. First, on Asia,are you going to disclose how much you paid for that and is that the agencyhotel model that you’re duplicating from Europe? Robert J. Mylod -Chief Financial Officer: Well, in terms of the disclosure, we have filed an 8-K thathas the purchase price and earn-out structure in it, so that information isavailable in the 8-K.

Specifically, we paid a little over $15 million upfront ofcash, and then the earn-out structure really is based upon the performance ofthe business over a three-year period. The earn-out could be up to in excess of$140 million depending upon the achievement of a combination of both grossbookings and profit targets. So again, that’s over a three-year period, but theupfront cash component was about $15.7 million, give or take. Justin Post - MerrillLynch: Is the model pretty similar to your European model where youhave kind of a lower take rate and a hotel friendly model?

Well, we believe it’s a very hotel friendly model, but it isdifferent. It’s a merchant model at Agodaand they’ve been successful in achieving significant growth, although atsmall numbers with that model. And I think we will have an opportunity toobserve over time which model has better customer acceptance, better websiteconversion and allows us to build up our supply the most rapidly. :

.: Justin Post - MerrillLynch: let’s just talk a little bit about one of your competitors.They’re investing north of what looks like $150 million in technology spend andyours is maybe one-tenth that. Do you look at your technology spend as the same,do you classify it the same on your income statement and do you think that youneed to do more investments there? With your websites, do you have the sameability to maybe optimize that they’re trying to build over there? Could youjust comment on the relative amount of investment you’re doing on the tech side?

First of all, I don’t think that the differences areprincipally due to any difference in how we account for things. So I thinkwe’re all essentially counting the same way. Keep in mind that the challengesand the things that the larger competitors are solving for are very differentfrom what we’re solving for. For example, you’ve got a number of acquisitions that ourcompetition had made and over time, they’re trying to put a lot of thesedifferent entities that are operating on different IT platforms onto oneplatform. That’s highly complex and it costs a lot of money because theplatform has to be flexible enough to take into account all the specificbusiness requirements of all of these different businesses all over the world.That’s something that we don’t have to do, we don’t intend to do, it’s notsomething that’s part of our business plan. Our platform works. The Booking.complatform works extremely well. We’ve been able to build linkages between theplatforms and will continue to do so, but we’re not going to try to build asingle platform that all of our businesses can operate on. Second of all, our international business, in particular ismuch less complex. We don’t sell airline tickets. We don’t package. We don’thave rental car. We’re not selling airline ticket services based on a bunch ofpotentially complicated customer service, flight alerts out to cell phones andthat sort of thing. So we’re really not competing with the larger players onsome of these customer service initiatives that are very important to theirbrand, but not as important to our brand that really stands for certainly lowerprices and value here in the United Statesand internationally, the most extensive and best hotel content available. Justin Post - MerrillLynch: Great. Thanks andcongratulations on a good quarter.

Thank you.

Your next question comes from Brian Fitzgerald - Banc ofAmerica. Brian Fitzgerald - Banc of America Securities: You mentioned that you're working to optimize acquisitioncosts. I was wondering if, given the efficiency of email as a marketingchannel, do you believe this is an area you can better leverage direct bookingseither through internal efforts or acquisition? Could you give any color on keyword pricing trends, eitherdomestically or internationally that you were seeing? Thanks.

Why don't I do thefirst one, and Bob will do the second. As to email, we agree with you. We thinkit is an excellent and highly efficient customer acquisition channel. It issomething that we have a lot of experience with here in the United States as an older and more mature business.We've just had a lot more time to work on our email executions, and I thinkthat's one of the areas where we can be helpful in trying to work with theinternational businesses over time to build out their email distribution andmake that a more important part of their customer acquisition. We've seen some evidence that that's helping internationallyat booking.com, but keep in mind that in the United States it is easier to acquire a large listof customers in your e-mail list because essentially, you can require thecustomer to opt out of email where as in Europe theyhave to affirmatively opt in. It is not quite as easy to develop large listsinternationally.

As for keywords, sortof a difficult question to answer. I listened to Expedia answer the questionlast night. I thought I'd probably give a very similar answer which is wealways assume it is a very competitive market, it has and will continue to be,and so there is constant upward pressure on online keyword costs or really sortof any costs of customer acquisition. So what we've tried to do both in the United States and internationally is to set ROIhurdles that we try and stick by which basically means we have to do a reallygood job on building our supply, on merchandising our website to offset anyincreases in keywords. I would say thus far, and I think the numbers sort ofspeak for themselves, we've been able to do that. As I said in my remarks, we will continue to expect and planthat it will get more and more competitive over time for customer acquisitions,so that's why we have so work harder and harder on repeat usage and thosemerchandising points that I made to offset that.

Your next question comes from Mark Mahaney - CitigroupInvestments. Mark Mahaney - Citigroup: Jeff, you reminded people of the deep value proposition ofPriceline. In a macro environment that we're seeing in the U.S.of rising airline prices and rising ADRs, is there any particular reason whythat shouldn't be as beneficial for you as it was during that last cycle? Secondly in the European market, any new thoughts onexpanding beyond hotels, any new calculus as to is that a question of when oris it still a question of if? Thank you very much.

We've always said that as prices go up, the potential valueof our discounts to customers go up, and that's particularly powerful,potentially, in an economic environment where people are seeing a degradationof the value of their homes, potentially, and other pressures from high fuelprices and the like. We think there is a consumer benefit there, and we alsothink that we offer a revenue management benefit to our suppliers as they'repushing their prices up which they need to do to cover rising fuel costs,certainly in the case of the airlines. If their load factors start to dip alittle bit or if they see any softness in advanced bookings for particularflights and destinations, they can load some discounts in with Priceline and wecan help fill those seats up. We like to think that we're helpful in anenvironment where our suppliers have to push prices up to cover their costs. In the context of the international business, for the timebeing I think you should assume that we're going to stay focused on hotels.We've got such a material growth opportunity there, and it is by far the mostattractive segment of the market. We think it is a good idea to keep trying toprosecute that business without getting distracted on others.

Your next question comes from Imran Khan – JP Morgan. Bridget Wyshar - JP Morgan: This is Bridget Wyshar in for Imran. It seems like thecompetitors are starting to lower their fees internationally. Have you felt anypressure on your take rate there?

Again, at least we knewthat was going on as early as Q2 and certainly throughout Q3, and obviously inQ4. I think the numbers that we'vereported and the guidance that we're giving for Q4 wouldn't necessarily dictatethat we're seeing any sort of a dramatic change in our trajectories as a resultof any competitive moves. Bridget Wyshar - JP Morgan: In terms of your marketing internationally, are you stillfocused on Internet marketing or would you ever consider doing more brandedmarketing offline?

We've certainly much more focused on online marketing. Iwouldn't expect us to get involved in very broad offline television, radio-typecampaigns any time in the near future. It is very expensive. We seem to begetting good repeat business based on the online marketing that we're doing, sowhat that tells us is we are having success at building a brand with onlinespend. If we can continue to be successful in building the brand equity, wereally don't need to go offline.

Your next question comes from Jake Fuller - Thomas Weisel. Jake Fuller - Thomas Weisel Partners: A bit off the beaten track, but on the advertising front,we're seeing a lot of activity out there, some of these next generation metasearch sites evolving. I know you all have done a lot on that front too withMyTravelGuide and PriceBreakers. Has that become a material business for you atthis point? Are you planning to put a lot more into that?

I wouldn't say thatit is a material business for us at this point in time. Certainly siteadvertising across all of our brands is driving revenue for us and we're makingmoney on it and it is additive, but it is not material. We agree with some ofour competition that it represents a significant opportunity for us goingforward because we've got massive traffic and a lot of properties, includingour international business, that today essentially have no advertising revenueassociated with them. So we look at it as an attractive field and somethingthat represents some opportunity for us in the future. Jake Fuller - Thomas Weisel Partners: As you think aboutyour incremental M&A dollar, is it more going to be focused on theinternational markets than on things like advertising?

I wouldn'tnecessarily say that we look at our dollars and are seeing trade offs ofadvertising versus -- when you sayM&A, you mean literally asset acquisitions, right? Jake Fuller - Thomas Weisel Partners: Yes, I am sorry, Imisspoke. In terms of things you could acquire, the opportunities that you seein front of you, acquisition or advertising-driven revenue models that might beavailable to acquire or international acquisitions, any preference on thatfront?

No and again, I thinkyou can assume that we have a very, very active corporate development functionthat's looking at anything that we think could be complementary to ourbusiness, additive to our business, and we look at that almost separate andapart from how we think about how we're investing online. I think our goal is to grow our business organicallybasically as fast as we can while maintaining the ROI discipline that we'vebeen able to achieve here, and then we're also looking at acquisitions, aswell.

Our final question comes from Chris Gutek - Morgan Stanley. Chris Gutek - Morgan Stanley: In the press release, you guys mentioned that the U.S.operating margin is improving, I think, “substantially” is the word you used. Iam wondering if you can put at least some rough quantification around that andif you could also give us a rough sense for how your margins are trending in Europe? To push my luck here a bit, if you would be inclined to giveus where you think margins can go with maturity a couple years down the road?What kind of a target would it be?

I'm not going toanswer the second question, Chris. Again, we're just not giving out any sort ofguidance beyond 2008, and I am probably going to not also answer your firstquestion other than to say that we had several hundred basis points ofoperating margin improvement in the U.S.The one thing I said in my remarks was that our operating profit grew atseveral multiples of the growth rate of our gross bookings, so I think thathelps tell you that we had a very, very material increase in operating leveragein Q3 in the United States. Chris Gutek - Morgan Stanley: That is helpful. In Europe, would yousay you're getting closer to a mature company margin in Europeor by contrast, given the high revenue growth, is maturity still years awayfrom a profitability perspective?

Well again, as I said in the prepared remarks, the big wildcard there is going to be the cost of customer acquisition over time and howwell we do on cultivating repeat usage. I would say if we can maintain our ROItargets which obviously, they've been very attractive, then I would say thereis certainly more operating leverage in that model from an OpEx perspective becausethe rest of our costs are not completely fixed, but personnel costs and ITcosts and depreciation costs, those are very leveragable in general. The big wild card is the cost of customer acquisition and Ijust wouldn't want to predict where that's going to go over the next severalyears, but I certainly hope that even if that cost goes up, that we're notcompletely done in terms of operating leverage. But again, I did want to pointout as I did in the prepared remarks that if you look at our performance thisyear, we've had a huge jump in operating leverage, no question about it, drivenagain by both Europe as well as again very big movementsin operating leverage in the U.S. I just didn't want people to start extrapolating that numberfor this year into next year because we the comps will be much more difficultin the U.S.,and again at least our plan will be to call for a higher cost of customeracquisition in Europe. That could have some downwardpressure on that operating leverage point.

That does conclude our Q&A session. Thank you, Mr. Boyd.Thank you, Mr. Mylod.