Last week, Merrill revealed much more significant write-downs than had previously been reported stemming from the subprime mortgage crisis this summer, totaling $8.4 billion.
Then on Friday, a report in the New York Times suggested that O’Neal had approached Wachovia about merging the firms, news that was not taken well by the Merrill Lynch board, which had reportedly not been approached about the idea.
On Sunday, the New York Times and the Wall Street Journal published reports saying the board had decided to force O’Neal out.
The firm also reported a $2.24 billion loss in the third quarter, approximately six times more than O’Neal had reported in early October. According to reports, analysts are predicting those numbers could be even higher. According to Bloomberg, CIBC World Markets is predicting that Merrill may have to cut the value of its holdings by an additional $4 billion in the fourth quarter, and analysts at Goldman, UBS AG, Wachovia, and Sanford C. Bernstein & Co. cut their recommendations on Merrill from the equivalent of buy to hold.
The revenue make-up of the firm has changed under O’Neal’s tenure, Bloomberg reported, saying that last year, Merrill’s brokerage produced just 34.9% of revenue, a noticeable decrease from 49.3% recorded in 2002, the year O’Neal took over as CEO, leaving his position as head of the brokerage division. Further, Bloomberg said, under O’Neal, net income rose 47% last year to a record $7.5 billion, and O’Neal took home $48 million in compensation.
According to a Wall Street Journal report, possible contenders for O’Neal’s replacement include Laurence D. Fink, CEO of BlackRock, Gregory Fleming, Merrill’s co-president, and Bob McCann, who leads Merrill’s brokerage division. The Journal speculated there could also be a deal where Fink and Fleming have a power-sharing agreement.