Merrill Lynch & Co.'s president, Herbert M. Allison Jr., widely seen as its next chief executive, stepped down abruptly today, creating uncertainty over future succession at the nation's biggest brokerage firm.
Allison, 55, told chief executive David Komansky over the weekend that he would retire, according to a Merrill spokesman. He will leave at the end of the month.
"At this point of my life and career, I realize it is an opportune time to make a change," Allison said in a statement. "For Merrill, the time is also right. It has strong market positions and talent."
His departure, after 28 years, stunned analysts and employees. "Herb had a stellar record at Merrill in terms of curbing expenses and providing direction," said Henry McVey, a financial industry analyst at Morgan Stanley. "His absence is significant."
Merrill is expected on Tuesday to report an 11 percent rise in second-quarter earnings, according to a survey of analysts by First Call Corp. The company is expected to post a profit of $1.46 per share, driven by an increase in stock trading.
The news of Allison's resignation fueled speculation throughout the industry that he was leaving because of a broad internal rift over the company's controversial new Internet strategy. Merrill announced last month that it would let clients buy and sell stocks online, without a broker. The move divided top executives and produced angst among 14,000 brokers.
"Obviously a change of that magnitude caused a lot of anxiety," said Paul Critchlow, a spokesman. But it had nothing to do with Allison's departure, he said, noting that Allison had been in agreement on the plan with Komansky.
"While we certainly have had a good deal of debate inside the firm on how to proceed with the Internet, in the end everyone came to the same conclusion and proceeded as we announced," Critchlow said. "There was no falling out over policy issues."
Allison, who was born in Pittsburgh and raised on Long Island, has been a major force in reshaping Merrill from a retail brokerage firm to a full-service investment bank. After four years in the Navy, he joined Merrill in 1971 as an associate in the investment banking division. He rose through the ranks, eventually heading up investment banking. He became president in December 1996, putting him in line as the clear successor to Komansky, now 60.
Allison had originally devised the online idea, to the chagrin of John "Launny" Steffens, a vice chairman and Merrill veteran who oversees the brokers. Steffens, who feared that it would fuel unsophisticated investing and day trading, eventually agreed that the company needed to expand online and took control of the project.
Komansky said that Allison's job would not immediately be filled. Many of his managerial duties will be given to Steffens, who is an executive vice president in charge of the U.S. client group. Steffens, who has been with the firm for 35 years, had been widely viewed as a prospective successor to Komansky before Allison became president.
Stephen Hammerman, a vice chairman, will assume additional responsibilities for a number of the firm's key support areas.
The company's shares rose 13/16 to 77 7/8, before the announcement. Its shares are up almost 17 percent this year. For the 12 months ended in April, they were up 50 percent.