Morgan Stanley, Dean Witter & Co. has been selling some credit businesses, leading some on Wall Street to wonder whether the Discover card might be next.

Far from it, say Morgan Stanley executives. They see the Discover card and brand as potent weapons for the coming cross-selling wars against other diversified financial companies.

"Discover has been our most important property," said Thomas R. Butler, president of Novus Services Inc., the business unit that includes Discover. "We clearly like the connection with 48 million card members."

The Discover name has recently been added to several products the firm already offered. New promotions advertise Discover mortgages and certificates of deposit, and Morgan Stanley executives say Discover insurance is in the works.

Building up the card portfolio is a secondary goal. The company wants to "bring value to other businesses and further entrench the Discover card name," Mr. Butler said.

The 12-year-old Discover card, known for its 1% cash-back rebate feature, has never risen to the volume levels of the bank-owned MasterCard and Visa systems, nor has it gained the cachet of American Express, the chief nonbank card rival.

Yet New York-based Morgan Stanley, itself an elite name in investment banking, sees its credit card base as a springboard to additional relationships.

The announced merger of Citicorp and Travelers Group suggests that the credit card business is a substantial way to reach consumers, Mr. Butler said. "It certainly has satisfied us that others think like we do."

After other recent retoolings by the unified Morgan Stanley and Dean Witter Discover organizations, the new sheen on Discover caught some observers by surprise.

"I think it is most likely that they will divest the Discover card," said Gary Gordon, a PaineWebber analyst. "It doesn't seem to fit with the rest of the business."

This year the company discontinued another offering of Novus Services, called Bravo, and sold the Prime Option MasterCard, a five-year-old joint venture with NationsBank Corp.

In April Morgan Stanley sold a credit card and transaction processing business that Dean Witter owned, SPS Transaction Services Inc., to Associates First Capital Corp.

The terms of the May 1997 merger of Morgan Stanley & Co. and Dean Witter, Discover & Co. stipulated that the Discover card could not be sold for two years.

Mr. Gordon said there are signs of strain in the portfolio. Discover has imposed more fees and cut cardholder benefits. The credit services division's earnings fell 21% in the 12 months through March 31.

"Whether they sell (Discover) or keep it, they have to invest in the business; otherwise the value will diminish," said BT Alex. Brown analyst Mark Alpert.

In a sign of its commitment, Morgan Stanley announced last week it had taken a long-term lease on prime air space in New York's Times Square, where Discover will be emblazoned on an electronic billboard seen by 1.5 million people a day.

The billboard, underneath the New Year's Eve ball, will have a clock that counts down to the millennium.

"Our presence atop Times Square reflects the strength and acceptance of Discover Card among consumers," said Lisa B. Lampert, vice president of marketing for Discover.

Steven Eisman, an analyst at IBC Oppenheimer, said the publicity could give Discover a much-needed boost, given that it has had "little receivables growth" and has seen delinquencies and chargeoffs "getting worse."

Morgan Stanley is "trying to broaden the appeal of the brand so that cross-selling will be easier," Mr. Eisman said.

The refocusing on Discover means that the strategy has come full circle since the early 1990s, when that was Dean Witter's only card name.

Shortly before the merger with Morgan Stanley, the emphasis shifted to Novus, with the idea that it could serve as an international acceptance mark for any number of products. Bravo, a card with two credit lines, and Private Issue, a series designed by celebrity artists, carried the Novus mark.

Dean Witter "tried to segment the marketplace," but the approach did not pan out, said Mr. Alpert.

Novus Financial Services-not the same as Mr. Butler's Novus Services-was once the consumer finance arm of Sears, Roebuck and Co. Before that it was part of another Sears unit, Allstate Finance Corp.

At Sears, there was "very much interest in looking for a vehicle to drive or promote a financial service empire," said Mr. Butler, whose business unit also began within Sears and was spun off with Dean Witter in 1993. Novus Services is still based in Riverwoods, Ill.

Morgan Stanley's interest in growth echoes Sears' of years ago, and it likes the sound of Discover.

The logo has started appearing on a number of banking products offered through Greenwood Trust Co., a Delaware-based subsidiary of Morgan Stanley that also has its roots in the Sears "stocks and socks" strategy of the 1980s.

This month the company launched Discover Connection Internet Service, giving cardholders access to the Internet for $18.95 a month and discounts when using Discover to buy certain items on-line.

The mortgages, home equity and auto loans, and savings accounts that have been marketed to Discover cardholders and Dean Witter brokerage clients for several years now bear the Discover logo. Discover Brokerage Direct is the name of the unit that offers brokerage services via telephone and the Internet.

The company declined to disclose the sizes of these portfolios, but it clearly has growth in mind.

Mr. Butler wants to tie the various products together more closely. Discover card customers now can put their cash rebates into a Discover Card CD Account, but other connections have to be established.

"We haven't been as adroit (in cross-marketing) as we should be," Mr. Butler conceded in an interview. "The linkage is simply by name. We focused our efforts on solicitations of Discover card holders."

The banking products also have cash-back features, like a $10 bonus for opening a CD of $2,500 or more, or $25 for opening a Discover Brokerage Direct account. These products are primarily promoted through direct mail and by Dean Witter account executives.

Mr. Butler declined to elaborate on a possible insurance tie-in and other such strategies, but said, "We are looking at other ways we can use the name."

American Express Co. is doing similar things, he said. It markets investment products and advisory services to cardmembers. It also renamed business units to take advantage of the powerful American Express brand name.

Morgan Stanley has strongly hinted that it plans to take the Discover brand international within five years. Mr. Butler said he anticipates a "big challenge" to build "a merchant base and cardmember base."

Observers said the Discover name may not translate well in other languages and cultures, and the Morgan Stanley name is more recognizable abroad. Like American Express, Discover may need partners to assemble a merchant-acceptance network.

"The Discover brand is a tough sell to a commercial bank abroad," Mr. Gordon said. "It would be a very expensive undertaking. Merchant fees are much higher overseas" and "they would have to go country by country."

"Going abroad for a lot of U.S. companies has meant going to London," Mr. Butler said. "We are thinking more broadly."

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