The recent departure of Herb Allison, president and chief operating officer, but also the anointed heir to the throne was a move that shocked even some senior Merrill executives. However, it is the latest in a series of slips at a firm that has traditionally been known as the "Thundering Herd" - a reference to its size and strength, as well as to its corporate logo, a bull.

When Merrill acquired Mercury Asset Management, the British asset management group which is an active investor in Irish companies, analysts were mainly enthusiastic, despite the obviously high price tag, citing their faith in Merrill's strategic vision.

They showed similar confidence when Merrill bought up the brokerage chain of the defunct Yamaichi in Japan. Subsequently, both deals have been criticised, and Merrill has admitted it had underestimated the costs involved in the Japanese venture.

Sentiment started to shift about a year ago. The market turmoil surrounding the near-collapse of Long-Term Capital Management hit Merrill more severely than some of its peers, such as Morgan Stanley Dean Witter.

However, as well as suffering severe losses in fixed income, the firm's reaction to the crisis was seen by some as an overreaction - it fired 5 per cent of its workforce and replaced or reshuffled key executives in fixed income and risk management.

At the same time as Merrill was suffering from difficulties in the fixed income side of its business, it faced painful strategic issues in the traditional core of its business - retail brokerage.

The largest US retail brokerage, it fell behind the game in sorting out its strategic response to the emergence of Internet trading by retail investors, many analysts say.

In what many at Merrill viewed as a humiliation, as well as a wake-up call, the market capitalisation of Charles Schwab, the discount broker that now does most of its business on the Internet, overtook Merrill's this year.

Merrill then changed its Internet strategy after some internal wrangling, which apparently involved both Mr Allison, a technophile, and brokerage chief Mr Launy Steffens, but launched a flat fee Internet trading service, on Monday, which is part of Mr Steffens' existing empire.

Still earnings results released earlier this month showed Merrill's traditional brokerage business is still thriving, and some analysts say its new strategy should have fixed the problem.

The Internet "is an opportunity for Merrill", argues Mr Raphael Soifer, an analyst at Brown Brothers Harriman. Meanwhile, the firm has nearly $500 million (€490 million) a day of new assets flowing into accounts, he says.

While none of these issues are in themselves severe worries, the overall impact has been for Merrill to lose some of its shine.

"The bull has an identity crisis," proclaimed a Forbes magazine article in April, which added: "As the mighty bull enters the new millennium, it is looking weary and confused."

One view is that Merrill has simply bitten off more than it can chew. "Can any firm really pursue all these initiatives and make them all work?" wondered a senior executive at a rival firm.

The departure of Mr Allison seems to be another in the series of cumulative slips, but may be more easily solved than some strategic issues.

"The succession is an unresolved issue, which we had thought was resolved," says Mr Soifer. "`The good news is that Mr Komansky will be there for another five years."

Furthermore, they have plenty of people who could be groomed for succession, says Mr Jim Hanbury at Schroders.

Among those seen as potential successors are Mr Stanley O'Neal, currently chief financial officer, and Mr Winthrop Smith jnr, head of the international private client group.

Senior Merrill executives as well as those outside the industry do not believe the loss of Mr Allison will have a noticeable impact on individual businesses. Although the departure is likely to lead to further merger speculation, Mr Soifer says: "I don't buy that it is a signal that Merrill is for sale."

Nonetheless, the concept of Merrill as a takeover target is certainly less laughable than it was a few years ago. It is now less highly valued, and Mr Komansky's stated positions - that he would not consider a merger unless it would create greater shareholder value - seems a lot less unthinkable than it did before the merger of Citibank and Travelers, and before Merrill's year of stumbles.