iscover Financial Services and the Discover Card are not going anywhere. Investment banking firm Morgan Stanley has taken its card unit off the block. In April 2005, amidst much corporate turmoil, Morgan Stanley said it was shopping around the Discover unit.

The news created a buzz throughout the banking and retailing sectors. Some conjectured that a large retailer, such as Wal-Mart Stores Inc., might purchase Discover (which began as a unit of Sears Roebuck & Co.).

But John Mack, Morgan Stanley's new Chief Executive Officer, announced on Aug. 17 that Discover is staying put. "Having looked closely at the Discover business, the Board and I are convinced that Discover is not only a strong business, but also an attractive asset for Morgan Stanley," Mack said in a statement.

Translation: Morgan Stanley couldn't get the money it was looking for. Timing might have been an issue, too. Recent acquisitions of monoline card issuers, (e.g., in June Bank of America Corp. announced plans to purchase MBNA Corp.) suggest that a business model that focuses only on card issuing is losing its allure.

Other factors that favored retaining Discover include 2004 pretax earnings of $1.27 billion, nearly a fifth of Morgan Stanley's 2004 total pretax earnings, and a strong brand familiarity with more than 50 million cardholders. In addition, the company now has more growth opportunities springing from a 2004 Supreme Court decision that opened the door for Discover to partner with financial institutions (see "Supreme Court Decides Against Visa, MasterCard in Six-year Antitrust Suit," The Green Sheet, Oct. 25, 2004, issue 4:10:02 ).

The acquisition of the PULSE ATM/debit network in January, with more than 4,100 financial institution customers, was also a factor. Also, in May, Discover entered into a partnership with China UnionPay (CUP), the only national bankcard association in China. The agreement will enable CUP cardholders to use their cards anywhere Discover is accepted in North America and vice versa for Discover cardholders in China. CUP has more than 800 million cardholders.