Internet phone and video service Skype went down in a global service outage on Wednesday, underscoring a weakness of the free online communication tool.

Skype, partly owned by Web retailer eBay Inc, said some users were having problems signing on. Users in the United States, Asia and Europe complained of the outage on social network site Twitter.

In its Twitter feed, the seven-year-old company apologized for the disruption and said it was investigating the cause. Around 3:30 p.m. EST, it said the service was returning to normal, but that it may take several hours for everyone to be able to use it again.

The so-far unexplained outage, just days before the Christmas holiday, marked the latest blow to the service's reputation.

Dropped calls and service quality have long been seen as a weak point for Skype, which offers free voice and video services between users as well as low-cost calls to landlines. It had 124 million users as of October.

The company's last major outage occurred in August 2007 following a routine software upgrade.

Many consumers have been reluctant to cut off their landline and rely solely on services like Skype due in part to questions about its reliability. Such concerns, along with worries about online security, have slowed Skype's expansion into the business market.

It now also faces competition from rival online phone providers such as Google Inc, which lets its users make calls through their Gmail accounts, and high-end videoconferencing tools like Cisco Systems Inc's umi service.

Skype is expecting to raise up to $1 billion in an initial public offering, sources familiar with the matter told Reuters last month. One source has said the IPO will likely come sometime next year.

Skype was founded in 2003. EBay bought it in 2005 for $3.1 billion.

In November, eBay sold a majority stake to an investor group including Silver Lake, Canada Pension Plan Investment Board and Andreessen Horowitz for $1.9 billion in cash and a $125 million note. EBay retained a 30 percent stake.

(Reporting by Ritsuko Ando. Editing by Robert MacMillan and Matthew Lewis)

Software