Shares of Wall Street brokerage house Morgan Stanley (MWD) gained more than 3 percent Monday after a media report said the company's board has approved the sale of its Discover Card (search) credit division.

The move comes as dissident shareholders and former executives of Morgan Stanley stepped up their letter-writing campaign, calling for the removal of Philip Purcell (search), Morgan Stanley's chairman and chief executive, in a full-page newspaper ad. Purcell and the board both sent memos to employees, reassuring them on the company's direction.

According to Dow Jones Newswires, citing one unidentified source close to the board, the board of directors authorized the divestiture, which is expected to net between $8 billion and $9 billion. The Dow Jones report did not state whether a buyer has been found yet.

Selling Discover would be a particularly harsh blow to Purcell, the former CEO of Dean Witter which created the Discover Card unit in 1986.

A spokeswoman for Morgan Stanley declined to comment on the report, which she called a "market rumor."

The markets responded favorably, however, with shares of Morgan Stanley climbing $1.74, or 3.1 percent, to $58.61 on the New York Stock Exchange (search). Morgan Stanley has traded between $46.54 and $60.51 over the past 52 weeks.

The Discover Card business came to Morgan Stanley through its merger with Dean Witter Discover & Co. (search) in 1997. Last Wednesday, Morgan Stanley reported that the Discover Card division had pretax earnings in the latest quarter of $380 million, a quarterly record. Morgan Stanley also acquired the PULSE EFT Association network, which manages merchant transactions, on Nov. 15 to complement the card business. Company executives said last week that the company was working on a strategy to develop Discover debit cards.

However, the credit card business was seen by many analysts as a poor fit with Morgan Stanley, which does not have a consumer banking division. Dean Witter had tried to parlay the Discover Card business into an entire discount brokerage arm, but that ultimately folded after it was acquired by Morgan Stanley.

Merrill Lynch & Co. analyst Edward Najarian said Friday that a Discover sale might be likely, with Bank of America Corp. a potential buyer. The Independent newspaper in London reported Sunday that HSBC Holdings PLC (HBC) might seek to buy all of Morgan Stanley for 40 billion British pounds ($74.9 billion), though analysts said such a purchase would be too big for HSBC to manage and that simply buying Discover would be a better fit for the British banking company.

Meanwhile, the war of words between the self-styled "Group of Eight" shareholders and former executives, led by former Chairman S. Parker Gilbert and former President Robert G. Scott, and the company's leadership continued Monday.

The dissidents, in a full-page ad in The Wall Street Journal, addressed Morgan Stanley employees, asking them to "not lose hope" as the group works to change the company's leadership. "The leadership problems at the firm must be addressed and resolved," the ad said. The group said it would also encourage Morgan Stanley's board to create a system in which employees could complain anonymously about the company's management, and pointed to a new Web site, http://www.futureofms.com, for those who wished to send their complaints to the dissidents.

In a memo to employees written Saturday and obtained by The Associated Press, Purcell addressed recent management changes that had resulted in the unexpected departure of at least three key executives in the company's investment management division. Purcell blamed media coverage for blowing the management shakeup out of proportion and said the replacement of President Stephan Newhouse with new co-presidents Zoe Cruz and Stephen Crawford was necessary for the health of the company.

"Despite all the sturm und drang of the last week...the board cares about this firm. Your senior management cares about this firm," he wrote.

The board, in an employee memo issued Monday, defended the company's profit growth and stock price, which was attacked by the dissident group as lagging behind competitors, and voiced confidence in Purcell.

"The board...is fully behind Phil Purcell and your management team," the board memo said. "There is no fair or compelling case for a change in the CEO, an action that would involve risk and discontinuity."

A spokesman for the dissident group did not return a call seeking comment, while a spokeswoman for Morgan Stanley had no comment on the memos.