The agent of Bologna's Gaston Ramirez has been quoted as saying the Uruguayan international's proposed £12m move to Saints has collapsed.
Oscar Betancourt said that negotiations between the clubs had failed and that Saints were now switching their attention elsewhere.
"The negotiations with Southampton have ended," he told calciomercatoweb.it.
"I have spoken today with the English club's chairman and they are looking at other targets.
"Bologna didn't want to close the deal without the bank guarantees.
"The player was very happy with the offer received, but now he will probably remain at Bologna."
Saints had already agreed terms with 21-year-old Ramirez, who had publicly said last week that he was keen on a move to St Mary's.
However, the transfer stalled during negotiations between the clubs.
It is understood that an acceptable fee of about £12m - a record sum for Saints - had been offered, while an agreement had also been reached with Ramirez's former club, Uruguayan side Penarol, who own 30 per cent of the player.
However, there was disagreement over how the money to Bologna would be paid.
It has been reported that Saints were due to pay more than £6m up front, with two further instalments of just under £3m each being paid within a year. But Bologna were said to be unhappy to proceed without firmer guarantees for the extra funds.