hile Morgan Stanley adjusts to the reign of a new Chief Executive Officer, the company has set aside discussions on the fate of Discover Financial Services.

Morgan Stanley's former CEO Philip J. Purcell decided in April to spin off the card company, but he announced his resignation on June 13 amid bitter disputes with investors and former executives.

Purcell said he would leave as soon as his successor was named and no later than March 2006. On June 30, the company named John Mack as the new Chairman and CEO. Mack spent 30 years at Morgan Stanley (his most recent former posts were as President and Chief Operating Officer).

In a June 30 interview on CNBC's "The Closing Bell," Mack responded to questions about plans for Discover by saying he was more concerned about securing support of the Board and ensuring the strength of the franchise. Discover, he said, was not the first thing on his mind.

Although tax reasons dictated a spin-off, an analyst close to the situation said Morgan Stanley is weighing all of its options.

By controlling the acquiring, issuing and processing of its own transactions, Discover could be very attractive to financial institutions looking to expand into all facets of the credit card market.

With Morgan Stanley now under new leadership, its focus is on re-unifying key people within the firm, and Discover might not be a top priority. "We think the industry consolidation makes it more likely that Morgan Stanley is stuck with Discover for the time being," said David Hendler a Senior Analyst with research firm CreditSights Inc.

Many non-bank card issuers are losing ground in a market saturated with credit cards. Some of these have been acquired by banks. For example, Bank of America Corp. announced plans to buy MBNA Corp and Washington Mutual Inc. purchased Providian.

For Discover, entering the market on its own could be a risky move right now as smaller card companies become part of larger operations, which continue to consolidate multiple financial services under one roof.