Expedia, Inc. Reports Fourth Quarter and Full Year 2008 Results

Financial Summary & Operating Metrics (figures in $MM's, except per share
amounts)

3 Months  3 Months            Year       Year
                      Ended    Ended     Y/Y      Ended      Ended       Y/Y
    Metric          12.31.08  12.31.07  Growth   12.31.08   12.31.07    Growth

Gross bookings  4,020.1   4,522.0    (11%)   21,268.8  19,631.8       8%
    Revenue           620.8     665.3     (7%)    2,937.0   2,665.3      10%
      Revenue margin  15.44%    14.71%   +73bps     13.81%    13.58%   +23bps
    Gross profit      483.9     518.9     (7%)    2,302.3   2,102.9       9%
    Operating
     income before
     amortization **
     ("OIBA")         137.1     165.2    (17%)      697.8     669.5       4%
    Operating
     income /
     (loss) *      (2,889.1)    128.3    N / A   (2,429.0)    529.1    N / A
    Adjusted net
     income **         64.9      97.5    (33%)      375.1     395.9      (5%)
    Net income /
     (loss) *      (2,760.0)     65.4    N / A   (2,517.8)    295.9    N / A
    Adjusted
     EPS **           $0.22     $0.32    (31%)      $1.25     $1.24       1%
    Diluted EPS *    ($9.60)    $0.22    N / A     ($8.63)    $0.94    N / A
    Free cash
     flow **         (287.7)   (282.3)    (2%)      360.9     625.4     (42%)

*  3-months and year-ended 12.31.08 operating loss, net loss and diluted
       EPS reflect a $3.0 billion impairment of goodwill and intangible
       assets.
    ** "Operating income before amortization," "Adjusted net income,"
       "Adjusted EPS," and "Free cash flow" are non-GAAP measures as defined
       by the Securities and Exchange Commission (the "SEC"). Please see
       "Definitions of Non-GAAP Measures" and "Tabular Reconciliations for
       Non-GAAP Measures" on pages 17-19 herein for an explanation of non-GAAP
       measures used throughout this release.

Discussion of Results - Fourth Quarter 2008

    Recent Highlights

Global Presence
     --   Expedia Inc.'s international gross bookings were $1.35 billion and
          $7.04 billion in the fourth quarter and year ended December 31,
          2008, accounting for 34% and 33% of worldwide bookings, up from 33%
          and 30% in the prior year periods.
     --   International revenue, including TripAdvisor's international
          websites beginning in 2008, was $219 million and $1.01 billion in
          the fourth quarter and year ended December 31, 2008, or 35% of
          worldwide revenue in both periods, down from 36% in the fourth
          quarter of 2007, and up from 32% for the year ended December 31,
          2007.
     --   Expedia.ca, the leading online travel site serving Canada, eclipsed
          $1 billion in annual gross bookings for the first time in its
          history in 2008.
     --   hotels.com and its affiliates recorded nearly $2.9 billion in 2008
          worldwide gross bookings, including over $800 million in
          international bookings. hotels.com now offers hotel booking services
          through 58 worldwide sites, including recent local language website
          launches in Taiwan and China.

Brand Portfolio
     --   For the third year in a row, Hotwire.com(TM) was recognized for
          providing the "Highest Customer Satisfaction for Independent Travel
          Web Sites" according to J.D. Power and Associates' 2008 Independent
          Travel Web Site Satisfaction Study(SM) (For J.D. Power and
          Associates award information including information about the study
          see http://www.jdpower.com).
     --   Egencia, the world's fifth largest travel management company,
          celebrated its sixth anniversary in 2008 with $1.5 billion in gross
          bookings, over 20% revenue growth, record new client additions and
          the launch of service in several new geographies, including its most
          recent launches in Switzerland and India.
     --   JetBlue Airways and hotels.com(R) have partnered to provide JetBlue
          customers with access to hotel deals via
          http://www.jetblue.com/hotels. JetBlue customers can access popular
          features from hotels.com like Price Match Guarantee and no change,
          cancel or phone booking fees, as well as guest reviews from
          TripAdvisor.
     --   Nearly 12,000 Venere.com properties are now available for
          reservation on over 40 hotels.com points of sale around the world.
          Venere is the second largest online agency hotel company in Europe.

Content & Innovation
     --   Expedia.com introduced a test of its new Fare Alert download for its
          Elite Plus travelers, allowing air shoppers to receive automatic,
          real-time alerts of airfare decreases. Incorporating traveler
          feedback, the new Fare Alert features searches by specific dates or
          month of travel, as well as more robust origins and destination
          options.
     --   TripAdvisor(R) launched its Vacation Rental product powered by
          FlipKey, a leading vacation rental review site in whom TripAdvisor
          purchased a majority stake last summer. TripAdvisor now features
          70,000 vacation rentals, including FlipKey's leading collection of
          more than 50,000 verified guest reviews.
     --   Expedia.com celebrated its second anniversary as the exclusive
          travel partner of the ThankYou Network, surpassing the 2 million
          member mark. Travelers booking hotels, packages and other travel on
          Expedia.com can earn ThankYou points on top of their existing point
          programs. With the Citi PremierPass(R)/Expedia.com(R) Credit Card
          travelers can earn up to triple points on their Expedia purchases.

Partner Services Group ("PSG")
     --   Expedia, Inc. continued to grow its global hotel base in 2008,
          finishing the year with over 99,000 total properties, including over
          53,000 merchant properties, 34,000 agency properties and nearly
          12,000 incremental properties from our Venere acquisition. Including
          Venere and other agency hotels, Expedia now offers over 48,000
          unique properties in the EMEA region.
     --   Expedia launched its Expedia Partner Central ("EPC") website,
          enabling hotel suppliers to submit availability updates, request
          changes to hotel descriptions, respond to traveler reviews and
          connect with technical support.
     --   Expedia signed agreements with the Venetian & Palazzo properties in
          Las Vegas, ensuring availability of these hotel chains' rooms and
          pricing across the Company's worldwide points of sale.
     --   Rooms and pricing from over 4,000 IHG and Accor properties are now
          available for booking on Expedia and hotels.com worldwide sites.

EXPEDIA, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)
                                 (Unaudited)

Three Months Ended        Year Ended
                                      December 31,          December 31,
                                --------------------   -----------------------
                                     2008     2007       2008         2007
                                ----------  --------   ----------  -----------
    Revenue                       $620,811  $665,302   $2,937,013  $2,665,332
    Cost of revenue (1)            136,926   146,404      634,744     562,401
                                ----------  --------   ----------  -----------
    Gross profit                   483,885   518,898    2,302,269   2,102,931

Operating expenses:
      Selling and marketing (1)    215,873   235,046    1,101,403     992,560
      General and
       administrative (1)           91,766    85,989      355,431     321,250
      Technology and content (1)    52,426    51,268      208,952     182,483
      Amortization of
       intangible assets            16,898    18,257       69,436      77,569
      Impairment of goodwill     2,762,100       -      2,762,100         -
      Impairment of intangible
       and other long-lived
       assets                      233,900       -        233,900         -
                                ----------  --------   ----------  -----------
    Operating income (loss)     (2,889,078)  128,338   (2,428,953)    529,069

Other income (expense):
      Interest income                5,795     8,709       30,411      39,418
      Interest expense             (22,881)  (17,878)     (71,984)    (52,896)
      Other, net                   (12,164)   (5,154)     (44,178)    (18,607)
                                ----------  --------   ----------  -----------
    Total other expense, net       (29,250)  (14,323)     (85,751)    (32,085)
                                ----------  --------   ----------  -----------
    Income (loss) before income
     taxes and minority
     interest                   (2,918,328)  114,015   (2,514,704)    496,984
    Provision for income taxes     158,173   (49,884)      (5,966)   (203,114)
    Minority interest in loss
     of consolidated
     subsidiaries, net                 173     1,226        2,907       1,994
                                ----------  --------   ----------  -----------
    Net income (loss)          $(2,759,982)  $65,357  $(2,517,763)   $295,864
                                ==========  ========   ==========  ===========

Net income (loss) per
     share available to common
     stockholders:
      Basic                         $(9.62)    $0.23       $(8.80)      $1.00
      Diluted                        (9.60)     0.22        (8.63)       0.94

Shares used in computing
     income (loss) per share:
      Basic                        286,873   283,823      286,167     296,640
      Diluted                      287,546   300,530      291,830     314,233

(1) Includes stock-based
        compensation as follows:
         Cost of revenue              $499      $814       $2,253      $2,893
         Selling and marketing       1,208     3,704       10,324      12,472
         General and
          administrative             8,132     9,495       34,335      31,851
         Technology and content      3,425     4,587       14,379      15,633
                                ----------  --------   ----------  -----------
              Total stock-based
               compensation        $13,264   $18,600      $61,291     $62,849
                                ==========  ========   ==========  ===========

EXPEDIA, INC.
                         CONSOLIDATED BALANCE SHEETS
                    (In thousands, except per share data)
                                 (Unaudited)

December 31,
                                                 -----------------------------
                                                     2008              2007
                                                 ------------      -----------
                                      ASSETS
    Current assets:
      Cash and cash equivalents                    $665,412          $617,386
      Restricted cash and cash equivalents            3,356            16,655
      Short-term investments                         92,762               -
      Accounts receivable, net of allowance of
       $12,584 and $6,081                           267,270           268,008
      Prepaid merchant bookings                      66,081            66,778
      Prepaid expenses and other current assets     103,833            76,828
                                                 ------------      -----------
    Total current assets                          1,198,714         1,045,655
    Property and equipment, net                     247,954           179,490
    Long-term investments and other assets           75,593            93,182
    Intangible assets, net                          833,419           970,757
    Goodwill                                      3,538,569         6,006,338
                                                 ------------      -----------
    TOTAL ASSETS                                 $5,894,249        $8,295,422
                                                 ============      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable, merchant                   $625,059          $704,044
      Accounts payable, other                       150,534           148,233
      Deferred merchant bookings                    523,563           609,117
      Deferred revenue                               15,774            11,957
      Accrued expenses and other current
       liabilities                                  251,238           301,001
                                                 ------------      -----------
    Total current liabilities                     1,566,168         1,774,352
    Long-term debt                                  894,548           500,000
    Credit facility                                 650,000           585,000
    Deferred income taxes, net                      189,541           351,168
    Other long-term liabilities                     212,661           204,886
    Minority interest                                52,937            61,935

Commitments and contingencies

Stockholders' equity:
      Preferred stock $.001 par value                   -                 -
        Authorized shares: 100,000
        Series A shares issued and outstanding:
         1 and 1
      Common stock $.001 par value                      340               337
        Authorized shares: 1,600,000
        Shares issued: 339,525 and 337,057
        Shares outstanding: 261,374 and 259,489
      Class B common stock $.001 par value               26                26
        Authorized shares: 400,000
        Shares issued and outstanding:
         25,600 and 25,600
      Additional paid-in capital                  5,979,484         5,902,582
      Treasury stock - Common stock, at
       cost                                      (1,731,235)       (1,718,833)
        Shares: 78,151 and 77,568
      Retained earnings (deficit)                (1,915,559)          602,204
      Accumulated other comprehensive
       income (loss)                                 (4,662)           31,765
                                                 ------------      -----------
    Total stockholders' equity                    2,328,394         4,818,081
                                                 ------------      -----------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $5,894,249        $8,295,422
                                                 ============      ===========

EXPEDIA, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (Unaudited)

Year Ended December 31,
                                                ------------------------------
                                                    2008               2007
                                                ------------      ------------
    Operating activities:
    Net income (loss)                           $(2,517,763)         $295,864
    Adjustments to reconcile net income
     (loss) to net cash provided by
     operating activities:
     Depreciation of property and
      equipment, including internal-use
      software and website development               76,800            59,526
     Amortization of intangible assets
      and stock-based compensation                  130,727           140,418
     Deferred income taxes                         (209,042)           (1,583)
     (Gain) loss on derivative instruments assumed
      at Spin-Off                                    (4,600)            5,748
     Equity in loss of unconsolidated affiliates        979             2,614
     Minority interest in loss of consolidated
      subsidiaries, net                              (2,907)           (1,994)
     Impairment of goodwill                       2,762,100               -
     Impairment of intangible and other
      long-lived assets                             233,900               -
     Foreign exchange (gain) loss on cash
      and cash equivalents, net                      77,958           (12,524)
     Realized loss on foreign currency forwards      55,175               -
     Other                                            2,967             3,801
     Changes in operating assets and liabilities,
      net of effects from acquisitions:
       Accounts receivable                           32,208           (44,363)
       Prepaid merchant bookings and prepaid
        expenses                                    (15,072)          (32,378)
       Accounts payable, merchant                   (75,443)          101,068
       Accounts payable, other, accrued expenses
        and other current liabilities                54,400            51,702
       Deferred merchant bookings                   (85,443)          142,608
       Deferred revenue                               3,744             1,562
                                                ------------      ------------
    Net cash provided by operating activities       520,688           712,069
                                                ------------      ------------
    Investing activities:
     Capital expenditures, including internal-use
      software and website development             (159,827)          (86,658)
     Acquisitions, net of cash acquired            (538,439)          (59,622)
     Reclassification of Reserve Primary
      Fund holdings                                 (80,360)              -
     Distribution from Reserve Primary Fund          64,387               -
     Net settlement of foreign currency forwards    (55,175)              -
     Purchase of short-term investments             (92,923)
     Changes in long-term investments and deposits    1,155           (33,226)
     Proceeds from sale of business to a related
      party                                           1,624               -
                                                ------------      ------------
    Net cash used in investing activities          (859,558)         (179,506)
                                                ------------      ------------
    Financing activities:
     Credit facility borrowings                     740,000           755,000
     Credit facility repayments                    (675,000)         (170,000)
     Proceeds from issuance of long-term debt, net
      of issuance costs                             392,348               -
     Changes in restricted cash and cash
      equivalents                                    11,753            (6,494)
     Proceeds from exercise of equity awards          6,353            55,038
     Excess tax benefit on equity awards              3,191            95,702
     Withholding taxes for stock option exercises       -            (121,208)
     Treasury stock activity                        (12,865)       (1,397,173)
     Other, net                                        (979)             (844)
                                                ------------      ------------
    Net cash provided by (used in) financing
     activities                                     464,801          (789,979)
     Effect of exchange rate changes on cash and
      cash equivalents                              (77,905)           21,528
                                                ------------      ------------
    Net increase (decrease) in cash and cash
     equivalents                                     48,026          (235,888)
    Cash and cash equivalents at beginning of
     year                                           617,386           853,274
                                                ------------      ------------
    Cash and cash equivalents at end of year       $665,412          $617,386
                                                ============      ============

Supplemental cash flow information
     Cash paid for interest                         $53,459           $49,266
     Income tax payments, net                       179,273            78,345

Income Statement Notes

Gross Bookings / Revenue
     --   Expedia, Inc. makes travel products and services available on both a
          merchant and agency basis.
     --   Merchant transactions, which primarily relate to hotel bookings,
          typically produce a higher level of net revenue per transaction and
          are generally recognized when the customer uses the travel product
          or service.
     --   Agency bookings have historically related primarily to airline
          ticketing, with revenue generally recognized at the time the
          reservation is booked. Agency bookings now include hotel bookings
          from Venere, a European hotel provider we acquired in September
          2008, and whose revenue is recognized at the time hotel stays occur.
     --   Merchant bookings accounted for 39% of total gross bookings in the
          fourth quarter as compared to 41% in the prior year period. Our
          merchant mix declined primarily due to lower worldwide ADRs and the
          inclusion of hotel bookings from Venere.
     --   Merchant bookings represented 43% of total gross bookings in both
          full years 2008 and 2007.

Cost of Revenue
     --   Cost of revenue primarily consists of: (1) costs of our call and
          data centers, including telesales expense; (2) credit card expenses
          including merchant fees, charge backs and fraud; (3) fees paid to
          fulfillment vendors for processing airline tickets and related
          customer services and (4) costs paid to suppliers for certain
          destination inventory.
     --   Cost of revenue was 22.1% and 22.0% of revenue for the fourth
          quarters of 2008 and 2007. Excluding stock-based compensation, cost
          of revenue was 22.0% and 21.9% of revenue for the fourth quarters of
          2008 and 2007. Cost of revenue excluding stock-based compensation
          increased 9 basis points as a percentage of revenue as increased
          costs associated with our data center and other projects offset
          efficiencies in customer service, telesales and fulfillment costs.
     --   2008 cost of revenue was 21.6% of revenue compared with 21.1% in
          2007. Excluding stock-based compensation, 2008 cost of revenue was
          21.5% compared to 21.0% in 2007.  The 54 basis point increase in
          cost of revenue excluding stock-based compensation as a percentage
          of revenue was primarily due to cost increases including our summer
          gas card promotion and costs associated with our data center and
          other projects.
     --   Given potentially lower volumes and anticipated efficiencies in
          customer service, telesales, merchant fees and fulfillment, we
          expect cost of revenue to decrease in absolute dollars in 2009.
     --   Cost of revenue includes depreciation expense of $4 million for the
          fourth quarters of 2008 and 2007, and $17 million and $15 million
          for full years 2008 and 2007.

     --   Operating expenses in millions and as a percentage of revenue for
          the fourth quarter and full year periods of 2008 and 2007 were as
          follows (some numbers may not add due to rounding):

Operating Expenses           As a % of Revenue
                       --------------------------  --------------------------
                           Three months ended         Three months ended
                              December 31,                December 31,
                       --------------------------  --------------------------
                                                                      Change
                        2008      2007     Growth   2008      2007    in bps
                       ------   -------    ------  ------   -------   -------
    Selling and
     marketing         $214.7    $231.3      -7%    34.6%     34.8%     (19)
    General and
     administrative      83.6      76.5       9%    13.5%     11.5%     197
    Technology and
     content             49.0      46.7       5%     7.9%      7.0%      88
                       ------   -------    ------  ------   -------   -------
      Total operating
       expenses        $347.3    $354.5      -2%    55.9%     53.3%     266

Operating Expenses           As a % of Revenue
                       --------------------------  --------------------------
                              Years Ended                 Years Ended
                              December 31,                December 31,
                       --------------------------  --------------------------
                                                                      Change
                        2008      2007     Growth   2008      2007    in bps
                       ------   -------    ------  ------   -------   -------
    Selling and
     marketing       $1,091.1    $980.1      11%    37.1%     36.8%      38
    General and
     administrative     321.1     289.4      11%    10.9%     10.9%       7
    Technology and
     content            194.6     166.9      17%     6.6%      6.3%      36
                       ------   -------    ------  ------   -------   -------
      Total operating
       expenses      $1,606.7  $1,436.3      12%    54.7%     53.9%      82

Operating expenses include $18 million and $12 million of depreciation
     expense for the quarters ended December 31, 2008 and 2007, and $60
     million and $44 million for full years 2008 and 2007. The increase in
     depreciation expense in both periods primarily relates to technology and
     content depreciation related to capitalized software.

Selling and Marketing (non-GAAP)
          o    Selling and marketing expense primarily relates to direct
               advertising expense, including television, radio and print
               spending, as well as traffic generation costs from search
               engines, internet portals and our private label and affiliate
               programs.
          o    Approximately 29% and 26% of selling and marketing expense in
               the fourth quarters ended December 31, of 2008 and 2007 relate
               to indirect costs including personnel in PSG, TripAdvisor,
               Egencia and Expedia Local Expert ("ELE"). Approximately 24% and
               22% of full-year 2008 and 2007 selling and marketing expense
               related to these indirect costs.
          o    The 7% decrease in selling and marketing expense in the fourth
               quarter was primarily due to decreased direct online and brand
               marketing to support our Expedia.com, hotels.com and European
               points of sale, offsetting increased personnel costs related to
               the TripAdvisor Media Network, and direct marketing spend to
               support our earlier stage Asia Pacific markets and recently
               acquired businesses.
          o    Selling and marketing expense increased 11% for full year 2008
               compared to 2007 primarily due to increased online and brand
               marketing at our international, Hotwire and TripAdvisor Media
               Network websites, as well as increased personnel to support our
               growth at TripAdvisor, PSG, Egencia and Europe.

General and Administrative (non-GAAP)
          o    General and administrative expense consists primarily of
               personnel-related costs for support functions that include our
               executive leadership, finance, legal, tax, information
               technology and human resources functions, and fees for
               professional services that typically relate to legal, tax and
               accounting engagements.
          o    The 9% increase in general and administrative expense in the
               fourth quarter was primarily due to higher professional and
               legal fees, as well as inclusion of the general and
               administrative costs from Venere.
          o    General and administrative expense increased 11% for full year
               2008 compared to 2007 due to several factors including
               personnel and other costs related to our IT function, increased
               rent related to several new headquarters buildings (including
               $6 million in temporary double rent due to overlapping lease
               terms), increased costs for the TripAdvisor Media Network,
               higher legal expenses and the inclusion of costs from Venere.

Technology and Content (non-GAAP)
          o    Technology and content expense includes product development and
               content expenses principally related to payroll and related
               expenses, hardware and software expenditures and software
               development cost amortization.
          o    The 5% and 17% increases in technology and content expense in
               the fourth quarter and year ended December 31, 2008 were due to
               increased personnel costs related to our higher growth
               businesses including TripAdvisor, Venere and Egencia, as well
               as amortization of capitalized software.

Stock-Based Compensation Expense
     --   Stock-based compensation expense relates primarily to expense for
          stock options and restricted stock units ("RSUs"). We are currently
          utilizing a mix of options and RSUs for employee stock-based
          compensation.
     --   Fourth quarter stock-based compensation expense was over $13
          million, consisting of $11 million in expense related to RSUs and $3
          million in stock option expense.
     --   Fourth quarter stock-based compensation decreased $5 million
          compared to the prior year period primarily due to higher expense
          from a change in RSU forfeiture rate estimates in fourth quarter
          2007.
     --   Stock-based compensation expense for 2008 was $61 million,
          consisting of $50 million in RSU expense and $11 million in stock
          option expense. Stock-based compensation decreased $2 million from
          the prior year amount due to reduced stock option expense from
          fully-vested awards, partially offset by higher RSU expense.

Other, Net
     --   Other, net primarily relates to foreign exchange gains and losses,
          and our portion of gains/losses in equity investments and, through
          the second quarter of 2008, gains and losses related to our Ask
          Notes (see below).
     --   The $7 million increase in other, net loss for the fourth quarter
          primarily relates to a $12 million net foreign exchange loss in the
          fourth quarter of 2008, compared with a $7 million net foreign
          exchange loss in the prior year period.
     --   The fourth quarter net foreign exchange loss increased primarily due
          to a change in classification of foreign exchange gains and losses
          on merchant air transactions. The change was made to more
          appropriately reflect merchant air revenues based on the underlying
          economics of such transactions. Absent the change, fourth quarter
          revenue and OIBA would have been $12 million lower and other, net
          would have been a $5 million net gain.
     --   Other, net loss increased $26 million in 2008 primarily due to a $21
          million loss on Euros held to economically hedge the purchase price
          of a third quarter 2008 acquisition. In addition, we had a gain on
          our Ask Notes of $4 million in 2008 compared with a loss of $5
          million in 2007, which nearly offset a $12 million federal excise
          tax refund received in 2007.
     --   Foreign exchange losses in the fourth quarters of 2008 and 2007
          include $0.3 million and $4 million in losses related to eLong's
          U.S. dollar cash position and appreciation in Chinese Renminbi.
          Losses for both full year 2008 and 2007 were $9 million. eLong
          losses are excluded from calculations of adjusted net income and
          adjusted EPS.
     --   During the third quarter of 2008 we began using foreign currency
          forward contracts for the purpose of economically hedging foreign-
          denominated liabilities. These contracts are typically 30 days in
          duration and recorded at fair value, with any gains or losses
          recorded in 'Other, net' on the consolidated statements of income.
          In the fourth quarter we expanded our use of forwards to hedge a
          portion of our foreign-denominated revenues.
     --   At December 31, 2008 we were party to forward contracts with a
          notional value of $165 million and a mark-to-market loss of $1
          million, which is recorded as a liability in 'accrued expenses and
          other current liabilities.'
     --   Total losses on forward contracts during the fourth quarter and
          full-year of 2008 were $35 million and $56 million, which were
          largely offset by corresponding gains on our foreign-denominated
          liabilities, resulting in a minimal net impact to 'other, net.'

Income Taxes
     --   The effective tax rates on GAAP pre-tax income were 5.4% and (0.2%)
          for the fourth quarter and year-ended December 31, 2008, compared
          with 43.8% and 40.9% in the prior year periods.
     --   The effective GAAP rates for the fourth quarter and full year were
          significantly impacted by the impairment of goodwill, as a
          substantial portion of the impairment is not deductible for tax
          purposes.
     --   The effective tax rates on pre-tax adjusted income ("ANI") were
          40.5% and 39.2% for the fourth quarter and year ended December 31,
          2008 compared with 38.2% and 38.5% in the prior year periods.
     --   The effective ANI rate increased for the fourth quarter primarily
          due to losses from foreign operations for which we did not recognize
          the related tax benefit and higher interest accruals related to
          uncertain tax positions, partially offset by lower state tax
          accruals. The effective rate increased for full year 2008 primarily
          due to higher interest accruals related to uncertain tax positions.
     --   Effective GAAP and ANI rates historically are higher than the 35%
          federal tax rate primarily due to state taxes and accruals related
          to uncertain tax positions.
     --   Cash paid for income taxes in 2008 was $179 million, an increase of
          $101 million from the prior year primarily due to lower stock-based
          compensation related deductions.

Foreign Exchange
     --   As Expedia's reporting currency is the U.S. Dollar ("USD"), reported
          financial results are affected by the strength or weakness of the
          USD in comparison to currencies of international markets in which we
          operate. Management believes investors may find it useful to assess
          growth rates with and without the impact of foreign exchange.
     --   The estimated impact on worldwide and Europe growth rates from
          foreign exchange in the fourth quarter and year ended December 31,
          2008 was as follows (some numbers may not add due to rounding):

Worldwide                  Europe
                         ---------------------------- ------------------------
                                     Y/Y   Impact on           Y/Y   Impact on
                                   growth     Y/Y            growth     Y/Y
                                    rates   growth            rates   growth
                                  excluding  rates          excluding  rates
                            Y/Y    foreign   from       Y/Y  foreign   from
                           growth  exchange foreign   growth exchange foreign
                           rates  movements exchange  rates movements exchange
                         -------  --------- --------  ------ -------  --------
    Three months ended
       Dec. 31, 2008
        Gross Bookings    -11.1%    -7.7%     -3.4%   -11.4%   -1.5%    -9.9%
        Revenue            -6.7%     0.7%     -7.4%   -13.6%    6.1%   -19.7%
        OIBA              -17.0%     4.6%    -21.6%   -21.7%   14.0%   -35.7%

Twelve months ended
       Dec. 31, 2008
        Gross Bookings      8.3%     7.0%      1.3%    17.9%   13.8%     4.1%
        Revenue            10.2%    10.2%      0.0%    13.7%   14.2%    -0.5%
        OIBA                4.2%     6.2%     -2.0%     4.0%    7.7%    -3.7%

--   During the fourth quarter foreign currencies negatively impacted our
          growth rates due to depreciation in the Pound, Euro and Canadian
          Dollar, the three currencies most impacting our financial results.
     --   We expect that our first quarter 2009 growth rates will be
          negatively impacted by the significant year over year depreciation
          in the Pound, Euro and Canadian Dollar. Should these currencies
          remain at current levels we would also expect a negative impact on
          full-year 2009 growth rates.
     --   The negative impact of foreign exchange on our cash balances was $78
          million in 2008, and is included in 'effect of exchange rate changes
          on cash and cash equivalents' on our statements of cash flows. This
          amount reflects a net decrease of $99 million from 2007 primarily
          due to the sharp depreciation in foreign currencies during the
          second half of 2008 compared with appreciating foreign currencies
          throughout 2007, as well as the $21 million loss related to holding
          Euros to finance a third quarter 2008 acquisition.

Acquisitions
     --   The impact of acquisitions, primarily related to Venere,
          CarRentals.com and certain media content businesses, on the growth
          of gross bookings, revenue and OIBA in the fourth quarter and year
          ended December 31, 2008 is as follows (some numbers may not add due
          to rounding):

Three Months Ended         Twelve Months Ended
                         Dec. 31, 2008               Dec. 31, 2008
               ------------------------------- ------------------------------
                                     Impact                         Impact
                         Y/Y         on Y/Y              Y/Y        on Y/Y
                        growth       growth             growth      growth
                Y/Y     rates        rates       Y/Y    rates        rates
               growth excluding      from      growth excluding      from
               rates acquisitions acquisitions rates acquisitions acquisitions
               ------ ----------- ------------ ----- ------------ ------------
    Gross
     Bookings  -11.1%    -13.8%        2.7%     8.3%      7.1%       1.2%
    Revenue     -6.7%     -9.8%        3.1%    10.2%      8.3%       1.9%
    OIBA       -17.0%    -19.1%        2.1%     4.2%      1.9%       2.3%

Balance Sheet Notes

Cash, Cash Equivalents, Restricted Cash and Short-Term Investments
     --   Cash, cash equivalents, restricted cash and short-term investments
          totaled $762 million at December 31, 2008. This amount includes $47
          million of cash and $93 million of short-term investments at eLong,
          whose results are consolidated in our financial statements due to
          our controlling voting and economic ownership position.
     --   During the third quarter of 2008 we were unable to redeem an $82
          million money market investment in the Reserve Primary Fund (the
          "Fund"), due to the Fund's inability to fully honor redemptions
          related to its holdings of Lehman Brothers debt securities. As a
          result, we reclassified our holdings in the Fund from 'cash and cash
          equivalents' to 'prepaid expenses and other current assets,' and
          recorded a $1 million loss in 'other, net,' representing our
          anticipated losses in the Fund related to the Lehman securities.
     --   During the fourth quarter of 2008 we successfully redeemed $64
          million from the Fund, and included that amount in 'cash and cash
          equivalents.' The Fund is scheduled to make an additional redemption
          during the week of February 16, 2009, which would result in net cash
          proceeds to Expedia of approximately $5 million, leaving an
          unredeemed balance of $11 million in 'prepaid expenses and other
          current assets.'
     --   The $127 million increase in cash, cash equivalents, restricted cash
          and short-term investments for 2008 principally relates to $698
          million in OIBA, net long-term debt and credit facility borrowings
          of $457 million and non-cash depreciation of $77 million, partially
          offset by $538 million in acquisitions, $179 million in cash tax
          payments, $160 million in capital expenditures, $134 million use of
          cash from net changes in operating assets and liabilities other than
          taxes and interest, $53 million in interest payments and $16 million
          related to the reclassification of our investment in the Fund.

Accounts Receivable
     --   Accounts receivable include receivables from credit card agencies,
          corporate clients and advertisers as well as receivables related to
          agency transactions including those due from airlines and global
          distribution systems.
     --   Accounts receivable decreased $1 million from December 31, 2007 as
          the decrease in credit card receivables related to lower merchant
          gross bookings offset increased receivables from our growing media,
          European agency hotel and managed corporate travel businesses.

Prepaid Merchant Booking, Prepaid Expenses and Other Current Assets
     --   Prepaid merchant bookings primarily relate to our merchant air
          business and reflect prepayments to our airline partners for their
          portion of the gross booking, prior to the travelers' dates of
          travel. Prepaid merchant bookings were roughly flat in 2008 compared
          with 2007 as merchant air bookings growth was limited.
     --   Prepaid expenses and other current assets are primarily composed of
          prepaid marketing, merchant fees, license and maintenance agreements
          and insurance.  These amounts increased $27 million over 2007 due to
          the reclassification of $16 million related to our remaining Reserve
          Fund investment from cash to 'prepaid expenses and other current
          assets,' and an $11 million increase in prepaids related to growth
          in our businesses.

Property and Equipment, net
     --   Property and equipment, net increased $68 million due primarily to
          leasehold improvements associated with our various headquarters
          moves, server, network and other hardware equipment additions and
          capitalized software development, which were partially offset by
          depreciation expense and an $11 million long-term asset impairment.

Long-Term Investments and Other Assets
     --   Long-term investments and other assets include transportation
          equipment, collateral deposits related to our cross-currency swap
          agreements, equity investments and capitalized debt issuance costs.
     --   Long-term investments and other assets decreased $18 million from
          December 31, 2007 principally related to the reduction in collateral
          related to cross-currency swap agreements we terminated during the
          third quarter of 2008.

Goodwill and Intangible Assets, Net
     --   Goodwill and intangible assets, net primarily relates to the
          acquisitions of hotels.com, Expedia.com and Hotwire.
     --   Primarily as a result of a decline in the market value of Expedia's
          capitalization, we performed an interim impairment test on December
          1 which resulted in fourth quarter write-downs of $2.76 billion in
          goodwill and $223 million in intangible assets with indefinite
          lives.
     --   $690 million of intangible assets, net relates to intangible assets
          with indefinite lives, which are not amortized, principally related
          to acquired trade names and trademarks. This amount decreased $178
          million, primarily due to the above impairment, partially offset by
          a $48 million increase due to several acquisitions in 2008,
          including Venere, VirtualTourist, CarRentals.com and OneTime.
     --   There was no cash tax impact from the goodwill and intangible
          impairments.
     --   $144 million of intangible assets, net relates to intangible assets
          with definite lives, which are generally amortized over a period of
          two to twelve years. The majority of this amortization is not
          deductible for tax purposes.
     --   Amortization expense related to definite lived intangibles was $17
          million for the fourth quarter and $69 million for full year 2008,
          compared with $18 million and $78 million for the prior year
          periods. The decreases were primarily due to the completed
          amortization of earlier period technology and supplier intangible
          assets. Assuming no impairments or additional acquisitions, we
          expect amortization expense for definite lived intangibles of $36
          million in 2009 and $28 million in 2010.

Deferred Merchant Bookings and Accounts Payable, Merchant
     --   Deferred merchant bookings consist of amounts received from
          travelers who have not yet traveled and the balances generally
          mirror the seasonality pattern of our gross bookings. The payment to
          suppliers related to these bookings is generally made within two
          weeks after booking for air travel and, for all other merchant
          bookings, after the customer's use of services and subsequent
          billing from the supplier, which billing is reflected as accounts
          payable, merchant on our balance sheet. Therefore, especially for
          merchant hotel, there is a significant period of time from the
          receipt of cash from our travelers to supplier payment.
     --   For the year ended December 31, 2008, the change in deferred
          merchant bookings and accounts payable, merchant was a net use of
          cash of $161 million compared with a net source of cash of $244
          million in 2007 due primarily to lower growth in our merchant hotel
          business in the second half of 2008 compared with the second half of
          2007.

Accounts Payable, Other
     --   Accounts payable, other primarily consists of payables related to
          the day-to-day operations of our business.
     --   Accounts payable, other increased $2 million primarily due to
          increased professional fees and other expenses, mostly offset by a
          decrease in accrued marketing expenses.

Accrued Expenses and Other Current Liabilities
     --   Accrued expenses principally relate to accruals for cost of service
          related to our call center and internet services, accruals for
          service, bonus, salary and wage liabilities, a reserve related to
          the potential settlement of occupancy tax issues, and accrued
          interest on our various debt instruments.
     --   Accrued expenses and other current liabilities decreased $50 million
          primarily due to our payment of additional acquisition consideration
          based on financial performance of the acquiree, the conversion of
          our remaining Ask Notes (see below) and lower bonus accruals,
          partially offset by higher interest expense accruals related to our
          8.5% Notes (see below), taxes payable and rent accruals associated
          with our various headquarters moves.

Ask Derivative Liability
     --   In connection with IAC's acquisition of Ask, we issued 4.3 million
          shares of Expedia, Inc. common stock into an escrow account, which
          shares (or cash in equal value) were due to holders of Ask
          convertible notes upon conversion ("Ask Notes"). These shares were
          included in diluted shares from the date of our spin-off from IAC.
     --   During the second quarter of 2008 the remaining Ask Notes were
          converted.
     --   A $15 million liability for the Ask Notes was included in 'accrued
          expenses and other current liabilities' on the December 31, 2007
          balance sheet.
     --   For 2008 we recorded a net gain of $4 million related to the Ask
          Notes due to decreases in our share price during the time periods
          prior to conversion. In 2007 we recorded a net loss of $5 million
          related to increases in our share price during the year. These gains
          and losses were recorded in 'other, net' on our consolidated
          statements of operations and were excluded from both OIBA and
          adjusted net income for the corresponding periods.

Borrowings
     --   Expedia, Inc. maintains a $1 billion unsecured revolving credit
          facility, which expires in August 2010. As of December 31, 2008, we
          had $650 million in borrowings outstanding under the facility. We
          intend to repay $550 million of that amount by February 20, 2009.
     --   Related to our goodwill and intangibles impairment, we recently
          amended our credit facility to replace our tangible net worth
          covenant with a minimum interest coverage covenant. As part of this
          amendment several financial covenant levels were tightened, and
          pricing on our borrowings increased by 200 basis points.
     --   At our discretion we can choose a base rate equal to (1) the greater
          of the Prime rate or the Federal Funds Rate plus 50 basis points or
          LIBOR plus 100 basis points or (2) various durations of LIBOR.
          Current draws are based on 1-month LIBOR.
     --   Outstanding borrowings under the facility bear interest reflecting
          our financial leverage, which based on our December 31, 2008
          financials and amended pricing would equate to the base rate plus
          287.5 basis points.
     --   Outstanding letters of credit under the facility as of December 31,
          2008 were $58 million, which amount is applied against our $1
          billion borrowing capacity under the facility.
     --   Long-term debt relates to $500 million in registered 7.456% Senior
          Notes (the "7.456% Notes") due 2018, and $400 million in 8.5% Notes
          due 2016 (the "8.5% Notes"). The 7.456% Notes are repayable in whole
          or in part on August 15, 2013 at the option of the note holders. The
          8.5% Notes are non-callable until 2012. Both Note issues can be
          retired at any time at our option subject to make-whole premium of
          37.5 basis points in the case of the 7.456% Notes and 50 basis
          points in the case of the 8.5% Notes.
     --   As of December 31, 2008 we were in compliance with the financial
          covenants under our debt facilities.
     --   Annual interest expense related to our 7.456% Notes is $37 million,
          paid semi-annually on February 15 and August 15 of each year. Annual
          interest expense related to our 8.5% Notes is $34 million, paid
          semi-annually on January 1 and July 1, beginning with January 1,
          2009. Accrued interest related to these notes was $32 million at
          December 31, 2008 and is classified as 'accrued expenses and other
          current liabilities' on our balance sheet.

Other Long-Term Liabilities
     --   Other long-term liabilities increased $8 million due to an $18
          million increase for uncertain tax positions recorded under FIN 48
          primarily related to acquired companies and $17 million in deferred
          rent related to lease incentives on our new headquarters, partially
          offset by the termination of cross-currency swaps during the third
          quarter and the reclassification of certain liabilities to 'accrued
          expenses and other current liabilities' as they became current.

Minority Interest
     --   Minority interest primarily relates to the minority ownership
          position in eLong, an entity in which we own a 61% interest (55%
          fully-diluted) and results for which are consolidated for all
          periods presented.
     --   Minority interest decreased $9 million in 2008, primarily reflecting
          the minority owners' share of eLong's 2008 losses, as well as share
          repurchases by eLong during the year.

Purchase Obligations and Contractual Commitments
     --   At December 31, 2008 we have agreements with certain vendors under
          which we have future minimum obligations of $22 million in 2009 and
          $10 million in 2010. These minimum obligations are primarily for
          software and telecom services. These obligations are less than our
          projected use for those periods, and we expect payment to be more
          than the minimum obligations based on our actual use.
     --   In conjunction with our investment in a travel company, we have
          entered into a commitment to provide a $10 million revolving
          operating line of credit and a credit facility for up to $20
          million. Approximately $2 million was drawn on the line of credit
          and no amounts were drawn on the credit facility as of December 31,
          2008.
     --   In June 2007 we entered into a lease for new headquarters office
          space located in Bellevue, Washington for which we recognized rent
          expense beginning April 2008 in addition to rent expense on our now
          previous location. The ten-year term and cash payments related to
          this lease began in November 2008, at which point we ceased
          recognizing double rent, which amounted to $6 million in 2008.
     --   Our estimated future minimum rental payments under operating leases
          with non-cancelable lease terms that expire after December 31, 2008
          are $39 million for 2009, $37 million for 2010, $35 million for
          2011, $34 million for 2012, $28 million for 2013 and $93 million for
          2014 and thereafter.

Common Stock
     --   In 2007 we completed two tender offers to purchase a total of 55
          million shares of Expedia, Inc. at an average price of $25.18 for a
          total cost of $1.39 billion, excluding fees and expenses. The
          Company used $500 million in available borrowings under its
          revolving credit facility and approximately $885 million in cash to
          fund the tender offers. The Company's directors and executive
          officers and Liberty Media Corporation did not tender any shares.
     --   In August 2006 our Board of Directors authorized the repurchase of
          up to 20 million common shares. There is no fixed termination date
          for the authorization, and as of the date of this release we have
          not repurchased any shares under this authorization.

Class B Common Stock
     --   There are approximately 26 million shares of Expedia Class B common
          stock outstanding, owned by a subsidiary of Liberty Media
          Corporation ("Liberty"). Class B shares are entitled to ten votes
          per share when voting on matters with the holders of Expedia common
          and preferred stock.
     --   Through the common stock our Chairman and Senior Executive, Barry
          Diller, owns directly, as well as the common stock and Class B stock
          for which he has been assigned an irrevocable proxy from Liberty,
          Mr. Diller had a controlling 60% voting interest in Expedia, Inc. as
          of January 23, 2009.

Warrants
     --   As of December 31, 2008 we had 58.5 million warrants outstanding,
          which, if exercised in full, would entitle holders to acquire 34.6
          million common shares of Expedia, Inc. for an aggregate purchase
          price of approximately $773 million (representing an average of
          approximately $22 per Expedia, Inc. common share).
     --   32.2 million of these warrants are privately held and expire in
          2012, which, if exercised in full, would entitle the holders to
          acquire 16.1 million common shares of Expedia, Inc. for an aggregate
          average exercise price of $26.
     --   26.0 million warrants were publicly-traded prior to their expiration
          on February 4, 2009. Approximately 200 warrants for 100 common
          shares were exercised prior to expiration.

Shelf Registration
     --   In October 2007 we filed a shelf registration statement with the
          SEC, under which we may offer from time to time debt securities,
          guarantees of debt securities, preferred stock, common stock or
          warrants. The shelf registration statement expires in October 2010.

Stock-Based Awards
     --   At December 31, 2008 we had 18.9 million stock-based awards
          outstanding, consisting of stock options to purchase 9.8 million
          common shares with a $23.29 weighted average exercise price and
          weighted average remaining life of 4.83 years, and 9.0 million RSUs.
     --   During the fourth quarter 2008 we granted 0.5 million RSUs,
          primarily related to new hire grants, and 1.3 million option awards
          in association with our announced organizational realignment.
     --   For 2008, total equity grants were 5.4 million, or 3.4 million net
          of cancellations, expirations and forfeitures.
     --   In October 2007 Expedia's Chairman and Senior Executive exercised
          options to purchase 9.5 million shares. 2.3 million shares were
          withheld by Expedia to cover the exercise price and 3.5 million
          shares were withheld to cover tax obligations, with a net delivery
          to Mr. Diller of 3.7 million shares. Expedia cancelled all withheld
          shares and made the required tax payments of $121 million in
          connection with Mr. Diller's exercise, which payments appear in
          'Financing Activities' on our Statement of Cash Flows for the year
          ended December 31, 2007.

Basic, Fully Diluted and Adjusted Diluted Shares
     --   Weighted average basic, fully diluted and adjusted diluted share
          counts for the fourth quarters and years ended December 31, 2008 and
          2007 are as follows (in 000's):

3 Months 3 Months 12 Months 12 Months
                                            Ended    Ended    Ended    Ended
                    Shares                12.31.08 12.31.07 12.31.08 12.31.07
    -------------------------------------------------------------------------
    Basic shares                           286,873  283,823  286,167  296,640
    -------------------------------------------------------------------------
     Options                                   126    3,063      904    7,384
     Warrants                                  -     10,685    3,698    7,574
     Derivative liabilities                    -        463      191      510
     RSUs                                      546    2,496      870    2,125
    -------------------------------------------------------------------------
    Fully diluted shares                   287,546  300,530  291,830  314,233
     Additional RSUs, Adjusted Income
      method                                 8,358    5,736    8,108    6,237
    -------------------------------------------------------------------------
    Adjusted diluted shares                295,904  306,266  299,938  320,470

--   The decrease in basic, fully diluted and adjusted diluted shares for
          the quarter and year ended December 31, 2008 as compared to the
          prior year periods primarily relates to less dilution from employee
          equity awards and outstanding warrants.