Tonight we're gonna party like it's--2004

Published: December 16, 2004, 12:00 PM PST

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Arena. Though not technically a holiday event, the concert was nonetheless a generous gift.

The company paid $650,000 to book the rock legend, according to Web logger Robert Scoble. Cisco spokeswoman Abbey Smith would not discuss how much the company spent but said the expense was justified.

"We wanted to recognize and thank our employees," she said. "They have not received raises for the last four years."

These elaborate functions aren't exactly the norm in Silicon Valley--or anywhere else in the country. Almost one in four companies cut their holiday party budgets this year, and 64 percent planned to spend the same amount as last year, according to a survey of 100 human resources executives conducted by employment services company Challenger, Gray & Christmas.

While 70 percent of the firms surveyed were planning parties, most of them--63 percent--don't let employees bring dates. Companies are also keeping costs in check by hosting parties at the office and opting for lunch or appetizers rather than dinner, said John Challenger, CEO of the staffing firm.

But in Silicon Valley, a big holiday bash remains something of a status symbol.

"In the tech industry, there's more of a tradition of putting on some real wingdings," Challenger said.

Many in the industry have good reason to let the champagne corks fly. Initial public offerings made a comeback this year, led by Google's barn burner of an IPO in August. 2004 has also seen a revival in online advertising, which fuels so many Web businesses, and electronic gadgets are on most everyone's wish list this season. In addition, the economy and the job market are showing modest signs of improvement.

"It's the economy," said software executive Ammiel Kamon, whose firm, DiCarta, is planning a casino night at a Marriott hotel. "It's not just because we want to spend money. The company has grown--double, double, double."

Even start-ups that have yet to see profits are feeling the urge to splurge this year, fueled perhaps by the hope that an IPO may not be so far off. Plaxo, a venture-backed Internet company that specializes in social networking, took 30 employees and their guests to dinner at Zibibbo, an upscale restaurant in Palo Alto. Two years ago, with just a handful of employees, it was pizza and soda.

"We're really cheap bastards," said Rikk Carey, Plaxo's executive vice president of engineering and operations. "We don't do a whole lot the rest of the year; we just work our butts off. This was a reward for getting our stuff done."