Filed under: Deals, Microsoft (MSFT), Yahoo! (YHOO), China

Alibaba, the big Chinese e-commerce company is 39% owned by Yahoo! Inc. (NASDAQ: YHOO). That has been OK for Alibaba; Yahoo! has not taken any role in running the company. But, the firm and the Chinese government are a little worried that Microsoft Corp. (NASDAQ: MSFT) won’t see it that way if it buys Yahoo!

According to The Wall Street Journal (subscription required), “Alibaba has already been contacted by Chinese regulators seeking information on how it could be affected by a Microsoft buy.” The concern is perverse for two reasons.

China thinks nothing of allowing its sovereign funds to put capital into U.S. financial companies. Congress has already begun to worry in public that the Chinese might exert unwanted pressure on the managements of some of Wall Street’s biggest companies. The Chinese cannot have it both ways, buying into American businesses while setting limitations on investments in its country.

What is even more obvious is that one solution is to have Microsoft simply enter into a legal agreement that makes its shares in Alibaba non-voting. This grants the massive software company the advantage of an investment that will probably grow in value, and one that it will probably eventually sell back to Alibaba or even to the Chinese government.

Why make the issue more complicated than it really is?

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Industry, Southwest Airlines (LUV), AMR Corp (AMR), Contl Airlines’B’ (CAL), UAL Corp (UAUA), Delta Air Lines (DAL)

In the airline industry, it seems that any deal will due. Northwest Airlines Corp. (NYSE: NWA) is already fairly far along in discussions about merging with Delta Air Lines Inc. (NYSE: DAL). Now UAL Corp.’s (NASDAQ: UAUA) United Airlines is speaking with Continental Airlines Inc. (NYSE: CAL). But one set of negotiations in not enough for Continental. It is also talking to AMR Corp.’s (NYSE: AMR) American Airlines, according to The Wall Street Journal (subscription required). The paper reports “the talks were exploratory, and it isn’t clear they’ll go further.”

Airlines are seeking mergers under the premise that combining companies saves costs. While that is true to some extent, the marriages also hurt customer service — badly. Putting together incompatible reservations and service operations can take years and be extremely complex, which can make it hell for consumers who just want to take an airplane ride from here to there. Bad customer service is a sure way to drive off fliers, and that’s not good for revenue.

The savings in a merger also might not be as great as imagined. Fuel costs stay the same. The number of pilots and crews might drop some, but that can also cause labor disputes and strikes that interrupt service. The number of people needed to handle customer support and processing of reservations probably cannot be cut by much, especially if retaining revenue with unhappy fliers is important.

In an industry where mergers and Chapter 11 filings have been part of the landscape for decades, combining airlines might be no panacea. It is good to remember that the two most successful carriers in the United Says, American and Southwest Airlines Corp. (NYSE: LUV) have never been much enamored of merging.

Douglas A. McIntyre is an editor at 247wallst.com.

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