The ongoing takeover battle between Livedoor Inc. and Fuji Television Network offers food for thought regarding "market capitalization," now a favorite topic of conversation among executives of information-technology firms and Internet service providers. Market capitalization, which is calculated by multiplying the number of a company's outstanding shares of stock by the current market price per share, indicates how the company is being evaluated in the stock market.

The term gained currency in Japan following a U.S. IT-stock bubble in the late 1990s. That was when startup companies here went public by offering astonishingly high prices for their stocks. The founding managers of those newcomers would proudly say that their up-and-coming businesses had the solid backing of stock investors, asserting that market capitalization represented a corporation's real value.

As a result, market capitalization became an "article of faith" for startup entrepreneurs. Believing as they did that stock price was the best measure of corporate value, they tried aggressively to expand the market capitalization of their firms with little regard to their potential for actual earnings. One such businessman was said to be Livedoor President Takafumi Horie, who is now in the media spotlight thanks to his high-stakes bid to take control of Nippon Broadcasting System, an affiliate of Fuji TV.