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As time went on and Sullivan made changes at Legg, analysts began to conclude that he had the inside track.

"It's not a big surprise," said Jeffrey Hopson, a senior analyst with Stifel, Nicolaus & Co. in St. Louis.

Hopson said there are pros and cons to naming an insider as CEO.

"Some outside observers would have thought that this company, given its challenges, might have needed a fresh set of eyes to reassess and potentially make significant changes," Hopson said.

On the positive side, he said, "the company has been through a period of uncertainty," and an insider provides some immediate stability. This way, he said, Legg employees can "continue on without these major uncertainties hanging over them."

Hopson added that Sullivan has been an active interim CEO.

"He has been working hard, suggesting to the organization that while he has been a Legg Mason employee, the status quo is not acceptable," Hopson said.

Michael Kim, an analyst with Sandler O'Neill & Partners in New York, said the widely anticipated appointment of Sullivan removes an "overhang" on the stock.

"Now that there has been some resolution on the position of the CEO role, the board and senior management can now really fully focus on the task at hand, which is obviously to shift into more of a growth mode," Kim said.

That includes boosting the inflow of money into Legg's funds as well as possible acquisitions, he said.

Brian Rogers, chairman and chief investment officer of Baltimore-based T. Rowe Price, issued a statement supporting Sullivan's appointment.

"Joe Sullivan is a seasoned executive who knows his way around the Legg Mason organization and can work well with its investment groups," Rogers said. "We are confident that he will continue to stay focused on taking actions to build shareholder value."

T. Rowe Price, through its funds and other portfolios, is Legg's largest shareholder with a 10.4 percent stake in the company as of the end of last year.

Peltz's Trian Fund Management LLP, which is the next largest shareholder with 9.78 percent of Legg as of September, said in a statement, "Trian is enthusiastic about the appointment of Joe Sullivan as Legg Mason's new president and CEO. We believe Joe brings the leadership skills required to strengthen and expand the capabilities of Legg Mason to create long term value for Legg Mason shareholders."

Legg continues to see money flow out of its funds and its stock price has languished, down nearly 80 percent since the company's heyday in 2006.

At the end of January, Legg had $654.1 billion assets under management, compared with more than $1 trillion six years ago.

Legg also recently reported a third-quarter loss of $454 million -- the largest in five years -- following a writedown of assets at one of its affiliates.

After Fetting's departure last fall, speculation mounted over whether the company would remain intact or if Legg would sell off some of its eight affiliates, which largely operate independent of the parent company. A break-up would be bad for Baltimore, where Legg employs around 400 people at its Harbor East headquarters. Several years ago, Legg had about 1,000 workers in the Baltimore area.

In today's announcement, Sullivan reiterated that the company is committed to Legg's affiliate business model.

Analysts said Sullivan's appointment also signaled that Legg will continue in its current form.

"I don't think you will see any sort of a break up of the franchise," Sandler O'Neill's Kim said. "You could see them continue to add or subtract around the edges. The recent Fauchier acquisition is an example of that. Folding Legg Mason Capital Management into ClearBridge is another example."

Also this morning, Legg announced that Dennis M. Kass, who retired as CEO last year from asset manager Jennison Associates, will join the Legg board in April.

Legg's stock was down 49 cents to $27.10 per share in early afternoon trading.

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Joseph A. Sullivan

Age: 55

Hometown: Minneapolis

Education: Bachelors of Arts degree in economics from St. John's University; graduate of the Securities Industry Institute at the Wharton School of Business, University of Pennsylvania

Employment: Worked at Legg Mason from 1994 to 2005, then joined Stifel Nicolaus, serving as executive vice president and head of fixed income capital markets. Rejoined Legg in 2008 as senior executive vice president and chief administrative officer; served as head of global distribution before being named as interim CEO in October.

Outside memberships: Current trustee and former chair of the Securities Industry Institute; former chair of the fixed income committee of the National Association of Securities Dealers; board member of the Bond Market Association. Served as a trustee for Catholic Charities, St. Ignatius Loyola Academy; chair of the board of trustees for Loyola Blakefield School, and president of the Baltimore Youth Hockey Association.

Source: Legg Mason Inc.

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