Peter Cohan today looks at the decision of Morgan Stanley as another step in the exorcism of the ghost of former Morgan Stanley CEO Phil Purcell. And, incidentally, a rebuke to Sandy Weill's vision of the future of banking.
Former Morgan Stanley (NYSE: MS) CEO Phil Purcell started his career as a management consultant who jumped to his client, Sears Holdings Corp. (NYSE: SHLD), which implemented a "stocks and socks" strategy. After dumping Purcell in June 2005, his successor John Mack has finally decided to sell Discover on the heels of a 72% increase in its pretax income.
Sears' idea was that people could buy everything from clothing to financial services in a one-stop-shopping experience. To implement the strategy, Sears acquired stock broker Dean Witter in 1981 and in 1986 started a credit card business called Discover. But the strategy did not work, so in 1993 Purcell helped spin out Dean Witter from Sears. In 1997 Purcell merged Dean Witter with Morgan Stanley. The impetus behind the original merger between Dean Witter, a down-market stock brokerage, and blue chip Morgan Stanley always eluded me. But there was a significant amount of discussion -- led by Sanford Weill of Citigroup (NYSE: C) -- that one-stop shopping for financial services was a great idea.
Purging Purcell as Morgan Stanley spins off Discover [BloggingStocks]