After several days of strong gains, eBay shares spiked on Tuesday on reports that it was in talks to merge or form an alliance with Yahoo.

But shares in both Internet giants were sharply lower in Wednesday afternoon trade, apparently reflecting Wall Street skepticism about the likelihood of a deal. eBay was down 23-7/8 to 187-1/8 and Yahoo was off 11 to 157-3/4, both on the Nasdaq stock market.

PaineWebber analyst Sara Farley said in a published report on Wednesday that there were several barriers to a merger, including eBay's existing relationship with America Online Inc., a Yahoo rival, and the high pricetag of eBay.

She estimated that once Yahoo paid a premium over eBay's already high stock price, it would wind up paying around $45 billion for the online auction site -- or half of Yahoo's total market capitalization.

But analysts see many benefits of an alliance of some sort between the companies, such as exposure for eBay to Yahoo's extensive audience, and helping Yahoo strengthen its own commerce offerings.

Although Yahoo has an auction site of its own, eBay remains the clear industry leader and continues to extend its lead with new auction services.

On Wednesday eBay officially entered the lucrative business-to-business space with a new service called BusinessExchange, for small businesses to buy office products and equipment.

The new site marks one more step in eBay's evolution from a place for individuals to bid on consumer items and collectibles

to one that also offers cars, real estate and expensive office equipment.

EBay's Chief Operating Officer Brian Swette declined to estimate the size of the business-to-business trading market, other than to say it was "huge."

"Business Exchange is a natural evolution of the eBay business model, enabling businesses to obtain new, used and refurbished business merchandise and providing businesses of varying sizes a targeted way to reach buyers of business items," he said.

Some industry estimates project the business-to-business trading space could eventually surpass the size of the entire consumer auction market, giving eBay a new edge in e-commerce and making it more attractive to potential partners.

Partnerships and alliances, even between rival companies, have become a fact of life in the Internet industry. Although both Yahoo and eBay have declined to comment on reports that they were in talks, most Internet companies freely acknowledge they are constantly in discussions with potential partners.