(April 16) – “You might think Stanley O’Neal was a professional market timer,” writes Jacqueline Doherty in this week’s issue of Barron’s.

“Last July, just five months after taking over as president of Merrill Lynch’s giant retail brokerage division, he decided to eliminate 2,000 support jobs, or 5.4% of the unit’s total work force. Only in recent months, with the stock market looking much grimmer, has the competition started launching similar cost-cutting efforts. Yet O’Neal insists that he didn’t act because he thought the market was headed for a steep slide. The cost-cutting move just made good business sense, he says, pointing out that it has reduced annual expenses by $350-$400 million a year.”

” ‘Markets go up, markets go down. You can’t really control that,’ O’Neal said last week in a wide ranging interview in his office high in New York’s World Financial Center. ‘What we can control is the depth and nature and quality of the relationship we have with our clientele.’ “

“O’Neal makes a pretty convincing case that he is managing to reorient the brokerage division to better serve its millions of retail customers. Toward that end, he’s been establishing different levels of service for customers with different needs and different asset levels. He’s also gotten more of Merrill’s notoriously independent brokers to work in teams, with, say, one team member providing a client with advice on stocks, while another offers expertise in bonds or estate planning. On top of that, O’Neal has continued Merrill’s push to get more of its income from annual fees and less from commissions tied to individual transactions. Result: a simpler arrangement for customers and a steadier income stream for Merrill.”

“Already there is some evidence that O’Neal’s approach is working. In the first quarter, ‘transaction-based revenues could be off anywhere from 15% to 20%, and yet we had one of the better quarters, in terms of net profitability, we’ve had in the past eight quarters,’ says O’Neal.”

“That’s the kind of result that Merrill Chief Executive David Komansky and his board of directors will be looking for as they assess O’Neal, 49, who’s thought to be the leading contender to become Merrill’s president as early as next year. That would put O’Neal in line to succeed Komansky, 61, who is scheduled to step down as CEO in 2004.”