Morgan Stanley Dean Witter & Co.

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Morgan Stanley Dean Witter & Co.

founded: 1986 as dean witter financial services group. morgan stanley was incorporated in delaware, 1975. former companies date back to 1935.

Contact Information:

headquarters: 1585 broadway new york city, ny 10036 phone: (212)761-4000 fax: (212)761-0086 url: http://www.ms.com http://www.deanwitterdiscover.com

OVERVIEW

Morgan Stanley Dean Witter & Co. (formerly called Morgan Stanley, Dean Witter, Discover & Co.) is a finance, credit card services, and full-service securities brokerage firm. With more than 38.4 million accounts, the company is the largest single issuer of general purpose credit cards. The company's credit services operations reach roughly a third of U.S. households. More Americans hold its credit cards (Discover and NOVUS brands) than those of any other single issuer. Morgan Stanley Dean Witter's activities are almost evenly balanced between its consumer credit operations and the financial services it offers through its Dean Witter Reynolds brokerage and investment operations. Dean Witter, Discover & Co.'s credit operations also include credit transaction processing for private-label credit cards, home mortgage and equity loans, and a cobranded (with NationsBank) MasterCard/Prime Option card.

The other half of the business, Dean Witter Reynolds, deals in brokerage, mutual fund sales and management, investment advice, and investment banking. In 1997 Dean Witter, Discover & Co. agreed to merge with blue-chip investment bank Morgan Stanley.

COMPANY FINANCES

In the 1990s The New York City-based Morgan Stanley Dean Witter & Co. enjoyed seven consecutive years of record earnings that provided substantial benefits for its employees, who owned about 20 percent of its shares. In 1997 revenue skyrocketed to $27.1 billion, compared to 1996's $9.0 billion.

ANALYSTS' OPINIONS

The healthy U.S. economy of the 1990s was generally favorable for financial firms. According to industry analysts at Standard & Poor's (S&P), a strong economy stimulates borrowing activity and leads to reduced credit losses. However, the outlook for the diversified financial industry was mixed, since the financial group comprises a number of consumer-oriented financial service companies. Only modest increases in interest rates were expected in the late 1990s in response to continued economic growth. One major concern for financial companies like Morgan Stanley Dean Witter & Co. was the increased credit use by cardholders as a percentage of personal income. This reliance on credit, according to S&P, can lead to higher losses due to higher default rates.

HISTORY

Dean Witter, his brother Guy, and cousin Jean founded a securities firm in 1924 dealing in corporate and municipal bonds in San Francisco. The firm, Dean Witter & Co., soon opened a New York office and in 1929, joined the New York Stock Exchange. In April, seven months before the 1929 stock market crash, Dean Witter sold most of his stock holdings, and the firm entered the next decade in a healthy financial position. Dean Witter continued to manage the firm for more than 40 years. Under his leadership, the firm remained primarily regional, serving mostly wealthy retail customers

Under the leadership of Andrew Melton, the company merged in 1977 with another regional, primarily retail brokerage, Reynolds Securities International. Its owner, Richard Reynolds, Jr., was the son of the founder of Reynolds Metals and grandnephew of the founder of Reynolds Tobacco Company. With the addition of Reynolds Securities, which was not a direct competitor of Dean Witter's, Melton hoped to enlarge the company's investment banking activities. The new company—Dean Witter Reynolds—became the nation's second largest brokerage (based in San Francisco) after Merrill Lynch with more than 3,550 brokers. It also became a full-service financial institution.

In the early 1980s high interest rates and a downturn in the U.S. economy sent banks and financial services companies in search of new sources of capital. For Dean Witter, that source was Sears. In 1981 Dean Witter Reynolds, Inc. was acquired by the Sears, Roebuck and Co. family to form the core of a new financial services network. In 1986 Sears and Dean Witter introduced the Discover card, which became instantly successful. Sears wanted to diversify into financial Services and used Dean Witter temporarily to accomplish this goal. Sears replaced Melton with Robert Gardiner, who was oriented toward retail operations, and cut Dean Witter's staff and costs in order to fit the firm into its stores.

By the end of the 1980s it became apparent that Sears was not going to succeed in becoming a powerful financial player and was having trouble surviving as a retail giant. Needing cash, Sears made Dean Witter Financial Services an independent, publicly traded company in 1992. The newly renamed Dean Witter, Discover & Co. (DWD) began setting new records for earnings in both its credit card and securities businesses. In 1993 Sears sold 20 percent of its equity in Dean Witter, Discover & Co. to the public, and the remaining 80 percent of its shares went to Sears stockholders. Within three years the stock more than doubled its initial $27 offering price. In 1995 Dean Witter, Discover & Co. established NOVUS as a new credit card network. NOVUS Services launched a new Private Issue Card and BRAVO Card as part of a strategy to reach new market segments with cards accepted by the NOVUS Network of merchants.

In 1997 Morgan Stanley merged with Dean Witter, Discover and the name of the company was changed in 1998 to Morgan Stanley Dean Witter & Co. That same year the company sold its global custody business and its stake in SPS Transaction Services.

STRATEGY

Morgan Stanley Dean Witter intends to expand into a lucrative global market. Dean Witter's credit services business, which include credit card and servicing operations for its own and private-label cards, generates roughly half of the company's net income. With more than 38.4 million accounts, the company is the largest single issuer of general purpose credit cards. The majority of this revenue comes from the Discover card; but since that card's market share stabilized, the company began issuing a number of different cards aimed at particular market segments. Morgan Stanley Dean Witter & Co. plans to continue this strategy of using the NOVUS Network to create a recognized logo and expand its collection of card products. "We have the proven ability to issue cards as well as acquire merchants and process transactions through our NOVUS Network, which is itself the third largest network in the U.S.," said William R. Simmons, executive vice-president, NOVUS Services.

In addition, Dean Witter, Discover & Co. is "building a strong presence on the new frontier in electronic commerce," company CEO Joseph Purcell said, referring to the company's acquisition in 1996 of Lombard Securities Inc., a leading provider of online securities services, and its part ownership of Mondex USA, which provides smart cards (cards that store "electronic cash" on an embedded microprocessor chip) and advanced electronic payment systems. Consumers can use the card to make purchases at stores and over the Internet, and load their card with cash from their own home using telephones and PCs. In public locations they can use cashless ATMs to transfer money from their bank account onto the card. Merchants benefit through lowered fees for cash handling and in their ability to transfer funds electronically directly from their stores. "We are excited to be a founding partner of Mondex USA so that we can better serve our customers, both cardmembers and merchants," said William R. Simmons, executive vice-president, NOVUS Services, a unit of Dean Witter Discover.

FAST FACTS: About Morgan Stanley Dean Witter & Co.

Ownership: Morgan Stanley Dean Witter & Co. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: MS

Officers: Philip J. Purcell, Chmn. & CEO, 54, $10,473,750; John J. Mack, Pres. & COO, 53, $10,473,750; Thomas C. Schneider, Exec. VP, Chief Strategic & Administrative Officer, Director, 60, $2,460,125; Robert G. Scott, Exec. VP & CFO, 52, $5,256,875

Employees: 47,277 (1997)

Principal Subsidiary Companies: Selected subsidiaries include Dean Witter Futures and Currency Management, Inc.; Dean Witter InterCapital Inc.; Dean Witter Realty Inc.; Dean Witter Reynolds Inc.; Demeter Management Corp.; Greenwood Trust Company; NOVUS Financial Corp.; Prime Option Services; and 74 percent of SPS Transaction Services, Inc.

Chief Competitors: Dean Witter's competitors in providing financial services include: A.G. Edwards; American Express; Bear Stearns; Charles Schwab; Citicorp; Countrywide Credit; Equitable Cos. (Donaldson Lufkin & Jenrette and Alliance Capital Management); Household International; MasterCard; MBNA; Merrill Lynch; Morgan Stanley; Nomura Securities; Paine Webber; The Associates; and Visa.

PRODUCTS

Morgan Stanley Dean Witter & Company's products include the Discover Card and other NOVUS Cards (Private Issue, National Alliance For Species Survival, the IGA and Universal Studios and BRAVO Cards), NOVUS Financial Corporation, and Prime Option Services program. The NOVUS Network and SPS Payment Systems, which are the company's credit service operations, service more than 2.8 million businesses nationwide. NOVUS Financial Corporation is a consumer loan company offering home equity loans, mortgages, refinancing, and vehicle loans and leasing services via nationwide toll-free telephone service. SPS Payment Systems' principal services include electronic transaction processing, private label credit card operations, business account processing, and telephone transaction services.

CORPORATE CITIZENSHIP

Morgan Stanley Dean Witter & Co. provides grants to nonprofit groups to support initiatives in education, human services, community organizations, and cultural activities. The company encourages its employees to give something back to their communities, and many employees give generously of both time and money and volunteering for a wide range of community service activities. Many Morgan Stanley Dean Witter & Co. employees helped their neighbors through contributions to United Way, to which the company provides matching donations. The company's matching gifts have increased each year to keep pace with its employees' contributions.

GLOBAL PRESENCE

To gain overseas recognition such as that of MasterCard and Visa and to access their larger merchant base, Dean Witter fought a long battle for the right to issue VISA cards and MasterCards that so far has yielded mixed results. In 1993 it received permission (but only in partnership with NationsBank) to issue a MasterCard named Prime Option.

CHRONOLOGY: Key Dates for Morgan Stanley Dean Witter & Co.

1924:: Dean Witter establishes a brokerage house in San Francisco, California
1928:: Witter buys a seat on the San Francisco Stock Exchange
1935:: Morgan Stanley & Company incorporates
1969:: Founder Dean Witter dies
1972:: Dean Witter goes public
1978:: Reynolds Securities and Dean Witter join in the largest merger in the securities industry and become Dean Witter Reynolds
1981:: Sears acquires Dean Witter Reynolds
1986:: The Discover card is introduced
1993:: Sears spins off Dean Witter into an independent public company called Dean Witter, Discovery & Co.
1997:: Morgan Stanley merges with Dean Witter
1998:: Dean Witter, Discover & Co. changes its name to Morgan Stanley Dean Witter & Co.

EMPLOYMENT

In 1997 Morgan Stanley Dean Witter had the "third largest account executive sales organization in the United States with 9,946 professional account executives and 399 branches."