For Tellme, which has 330 employees, the money set aside amounts to more than $300,000 a worker. Yahoo is a much larger company, with more than 14,000 employees worldwide. And employee retention programs, if Microsoft acquires Yahoo, would likely be more tailored than for Tellme, analysts say. But even a program that is proportionately much smaller could add another sizable expense, perhaps a couple billion dollars, to the overall cost of bringing Yahoo into the Microsoft fold, analysts estimate.  “It would be a significant additional expense that would come due over several years,” said David B. Yoffie, a Harvard business school professor. “And Microsoft knew that when they made the bid for Yahoo.”  When buying companies in Silicon Valley, Microsoft in particular may have to offer attractive incentives to keep employees. Its reputation is still tainted by memories of its strong-arm tactics against companies like Netscape and Sun Microsystems in the 1990s, which prompted a long-running federal antitrust case that it lost.  That reputation is probably dated, noted Mark R. Anderson, chief executive of the Strategic News Service, a technology newsletter. “But if you’re in the Valley, that first impression of Microsoft still has be overcome,” Mr. Anderson said. “So I think the company pays more in employee retention packages, a Microsoft premium.”  At Tellme, there was some history of reputation to overcome. Michael McCue, a founder and the chief executive, was a vice president of technology at Netscape. He met regularly with Justice Department investigators when they were assembling their antitrust case against Microsoft.  When the chief executive of Microsoft, Steven A. Ballmer, offered to buy Tellme, Mr. McCue asked if his company would be forced to switch its data center operating system, Sun’s Solaris, to Microsoft’s Windows.  “No, no, we’ve learned our lesson,” Mr. Ballmer replied, according to Mr. McCue.  Mr. McCue declined to discuss Microsoft’s employee retention program, other than to say it has been ample and effective. A few have left, including Robert P. Komin, Tellme’s chief financial officer, who joined a solar energy start-up, Solexel. But 95 percent of the workers who were with Tellme when it became a subsidiary of Microsoft stayed.  “It’s been a great experience,” Mr. McCue said.
A look at that deal suggests that the hidden cost of “flight insurance” against employee defections may also be a reason Microsoft has resisted raising its bid.