Morgan Stanley’s chairman and chief executive officer, Philip Purcell, said he has the backing needed to withstand a challenge from former executives who ran the firm before its 1997 takeover by Dean Witter, Discover & Company.

“The board came out unanimously in support of me as CEO,” Mr. Purcell said in an interview in his personal conference room at Morgan Stanley’s headquarters in midtown Manhattan. “We have a deep talent pool in total and in terms of succession.”

Mr. Purcell’s removal Monday of President Stephan Newhouse, 58, prompted eight of Morgan Stanley’s old guard, including the former chairman, S. Parker Gilbert, and ex-president, Robert Scott, to renew calls for his ouster. Morgan Stanley shares yesterday dropped the most since September after fixed-income head Zoe Cruz, 50, and chief risk officer Stephen Crawford, 40, replaced Mr. Newhouse, who has worked at Morgan Stanley since 1979.

Although the stock has fallen 49% from its peak in 2000, the worst performance among the five biggest independent securities firms, the embattled Mr. Purcell, 61, says Morgan Stanley doesn’t need to change its strategy.

“We’re in good shape,” he said. “We already have the best brand in the securities business.”

Mr. Purcell on Tuesday named Joseph Perella, 63, who has led investment banking at three different firms during the past 20 years, a vice chairman, and put Jerker Johansson, 48, in charge of equity sales and trading, a business that had $4.1 billion of revenue last year.

His decision late Monday to replace Mr. Newhouse with underlings, Messrs. Cruz and Crawford, prompted the departures of Vikram Pandit, 48, who oversaw Mr. Cruz as head of sales, trading and investment banking, and John Havens, 48, his deputy in equities. Guru Ramakrishnan, 39, global head of trading technology and new products in the institutional equities group, left the firm yesterday.

Mr. Purcell said he spent Tuesday in internal meetings rather than contacting shareholders.

“These changes aren’t going to change the performance of the company, which needs to be revamped,” said Jennifer Chien, an analyst in Philadelphia with PNC Advisors, which manages $50 billion and owns 2.2 million Morgan Stanley shares. “With the departure of Vikram Pandit, that leaves the business susceptible to more bankers leaving.”

The loss of Messrs. Pandit and Havens also may cost Morgan Stanley business in equity underwriting and mergers work at a time when both are surging, said Rensselaer Polytechnic Institute professor Phillip Phan.

Mr. Purcell offered Mr. Newhouse a new, unidentified position at Morgan Stanley and hasn’t yet received a response. He said Messrs. Pandit and Havens were “legitimately disappointed” in being passed over for promotions.

The eight retired Morgan Stanley executives released a letter Tuesday written to Morgan Stanley’s board on March 3 that blamed Purcell’s “failure of leadership” for the firm’s lagging stock price and urged directors to find a successor “as soon as possible.”

The letter was signed by Mr. Gilbert, 71; Mr. Scott, 59; Joseph Fogg, 58; Anson Beard, 68; Lewis Bernard, 63; Richard Debs; Frederick Whittemore, 74, and John Wilson, 70.

Mr. Fogg, a former managing director who joined Morgan Stanley in 1970 and worked under Robert Greenhill in mergers and acquisitions, said they released the letter because Mr. Purcell refused to discuss their concerns.

“The board must recognize it’s time for a change,” Mr. Fogg said in an interview.

Mr. Gilbert’s stepfather, Harold Stanley, helped found the firm in 1935, two years after the Glass-Steagall Act required J.P. Morgan & Company to sell its securities-related activities, according to the company’s Web site. Mr. Gilbert joined in 1960, and then became president in 1983 and chairman in 1984.

The eight former executives hold a total of 11 million Morgan Stanley shares. They hired Mr. Greenhill, 68, who worked at the firm for three decades and now is CEO of Greenhill & Company, as an adviser.

The battle over Mr. Purcell’s future as CEO now pits the firm’s old guard and former Morgan Stanley managing director Scott Sipprelle against the board and a separate group of five former executives who say they support the company’s directors.

Mr. Sipprelle, 42, head of New York based hedge fund Copper Arch Capital, led the campaign for change at Morgan Stanley when he wrote the board in December, urging the firm to sell assets to boost the stock price. The businesses he targeted – Discover credit cards, the retail brokerage and asset management – are mainly the ones Mr. Purcell brought to Morgan Stanley when he merged Dean Witter with the firm in 1997.

“The senior citizens or retirees can’t get out of the past,” Mr. Purcell said in the interview. “Sipprelle’s thing was get rid of retail, asset management, and Discover. The trend lines in every business have good growth.”

The second group of former executives that backs Purcell worked with him at Dean Witter and sent a separate March 11 letter supporting the board. That document, also released Tuesday, was signed by Charles Fiumefreddo, Robert Gardiner, James Higgins, Richard Powers, and William Smith.

Morgan Stanley’s board includes, in addition to Mr. Purcell, four members who were Dean Witter directors: former Sears, Roebuck & Company CEO Edward Brennan, 71; Stonehenge Financial Holdings Principal Robert Kidder; former Fort James Corporation CEO Miles Marsh, 57, and Forstmann Little & Company limited partner Michael Miles.

The rest are former Tribune Company Chairman John Madigan, 67; London Business School Dean Laura D’Andrea Tyson, 57; Emerson Electric Company Chairman Emeritus Charles Knight; London School of Economics Director Howard Davies, 54; Anheuser-Busch Executive Vice President John Jacob, and Klaus Zumwinkel, 61, chairman of Deutsche Post AG’s management board.

“No matter how one views the merits of one side versus the other, it can only be concluded that this level of acrimony is unusual, to say the least, for a firm of this stature, and is a negative for the franchise even if not necessarily a long-lasting one,” Merrill Lynch & Company analyst Guy Moszkowski wrote in a note to investors yesterday.

Morgan Stanley’s earnings growth has ranked lowest or second worst among the five biggest securities firms in each of the past five years. Return on equity dropped to 17% in fiscal 2004 from more than 30% in 1999 and 2000.

“The basic things that shareholders want from us are growth and high return on equity,” Mr. Purcell said.

Mr. Purcell said he won’t yield to Mr. Sipprelle’s demand that Morgan Stanley sell the Dean Witter businesses.

“If there’s one thing this restructuring shows, it’s that we’re not going to get rid of retail,” he said.

Instead, Mr. Purcell combined the retail brokerage with asset management and sales, trading and investment banking under Ms. Cruz and Mr. Crawford. The three divisions generated 85% of Morgan Stanley’s $24.7 billion of revenue last year.