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By Brian Kelleher
NEW YORK, July 22 (Reuters) - David Komansky, the gregarious leader of Merrill Lynch & Co Inc. , will step down as chief executive of the Wall Street stalwart in December, passing the torch to President Stan O'Neal.
Komansky, a wisecracking Bronx native who worked his way up the executive ladder at Merrill since starting as a broker in 1968, will be leaving the firm at a critical time, as weak stock markets have hurt the brokerage and investment banking business.
But many believe that the low-key O'Neal is a good choice to help Merrill navigate the stock slump, as he has already overseen a dramatic corporate restructuring.
"It gives a stamp of approval to O'Neal's success so far," Prudential Securities analyst David Trone said. "O'Neal has the right focus for the post-bubble period."
Under O'Neal's tenure as president and chief operating officer, which began in July 2001, Merrill cut 15,000 jobs in a bid to boost profits. He and Komansky also worked to hammer out a $100 million settlement with New York State Attorney General Eliot Spitzer, who accused Merrill of misleading investors by tailoring its research reports to woo investment banking business.
"Anyone involved in a situation like that isn't going to be better off for it," said Michael Holland, chairman of investment firm Holland & Co. Komansky stepped up and was key to settling the investigation, he said.
"In a world where people want people to talk straight, he's one of those guys," said Holland, who owns Merrill shares. "I think Komansky has done a spectacular job."
Komansky, 63, will step down as CEO on December 2 and retire from the role of chairman in April 2003. O'Neal, 50, will then become chairman.
There had been speculation that Komansky would retire before 2004, his scheduled time, and the firm had indicated he would cede his CEO title before then.
DIFFERENT STYLES
Komansky is a Merrill lifer who joined the firm as a stock broker in Forest Hills, New York in 1968. A native of the Bronx, he has a picture of the tenement building he grew up in hanging in his office.
Komansky worked his way through a number of positions at Merrill before being named president and chief operating officer in 1995. He took over as CEO and chairman in December 1996.
"I wanted to be able to say when I was finished ... that the firm was better off with my having had the job than it would have been if I hadn't had it," Komansky told Reuters in a telephone interview. "I feel that I accomplished that."
Komansky was well known for his quips while O'Neal is a more retiring sort. O'Neal, who will become the first black CEO of a major Wall Street firm, is more buttoned up, preferring to stay out of the spotlight.
Before joining Merrill in 1986, O'Neal worked in the treasury department of General Motors Corp. and attended Harvard Business School. He has ran Merrill's brokerage corps, the world's largest, and served as its chief financial officer.
O'Neal was promoted to president and chief operating officer in July 2001 and quickly asserted himself in the new role, replacing the chiefs of several business units and overseeing the most dramatic restructuring on Wall Street, including 15,000 job cuts.
The restructuring "has put us in a position to move beyond broad-scale cost cutting," O'Neal told Reuters. "We want to turn our attention to the future in terms of revenue generation."
The cost-cutting moves have begun to yield fruit, as Merrill posted a 17 percent increase in second-quarter earnings despite slumping investment banking, brokerage and trading revenue.
"With O'Neal, it's more optimal execution than visionary kind of thinking," said Trone. "He's trying to get the franchise kicking on all cylinders first and then they'll talk about expansion and things of that nature."
O'Neal and Komansky both worked together to cobble out a settlement with Spitzer after the attorney general accused its analysts with misleading investors by issuing overly bullish and biased research reports. Spitzer uncovered a number of e-mails in which Merrill analysts, including former Internet star Henry Blodget, trashed companies they publicly touted.
"I think we handled the Spitzer investigation as a firm and as a team as well as we possibly could have," Komansky said, dismissing rumors that he and O'Neal were at odds over that issue as "nonsense."