Xerox Corp. (XRX) Chairman and Chief Executive Anne M. Mulcahy, known for turning around the company during her eight-year tenure, will retire as head of the company, ceding the position to her hand-picked successor, President Ursula M. Burns.

The 56-year-old Mulcahy, who will continue as chairman of the board after relinquishing the CEO title July 1, leaves Burns to navigate Xerox as it relies increasingly on the services side of its business to counter the steady decline of printing, which is suffering as more information is exchanged digitally.

While the 50-year-old Burns had been projected as Mulcahy's heir-apparent since becoming president in 2007, the timing of the move surprised company followers. In addition, Burns' promotion - made during Xerox's annual shareholder meeting Thursday - makes her the only African-American female chief executive among the Fortune 500's top 150 companies.

Xerox, Norwalk, Conn., makes printers both for offices and large-scale production, but garners most of its sales from its services businesses, which include maintenance contracts, printing supplies and lease revenues.

The recession has exacerbated weak demand for printers, and results have been muted by a strong dollar as much of its revenue comes from overseas.

Nonetheless, Xerox is perceived to be in solid shape - and certainly much stronger than the near-bankrupt condition which Mulcahy assumed in July 2001.

"Despite a tough economy, we are generating cash, building our technology and services pipeline, and poised for a period of steady profitable growth in the future," Mulcahy said Thursday in a press release.

She added that it was a privilege leading Xerox, and that Burns "is so well positioned to take Xerox to the next level."

Xerox spokesman Carl Langsenkamp said Mulcahy places tremendous value on succession planning, and has "prepared Xerox for the time when she chose to retire." Shannon Cross of Cross Research acknowledged as much by describing the promotion as "long telegraphed."

Burns will not keep the president post, and Langsenkamp said the company doesn't intend to name a replacement.

Xerox shares recently fell 7 cents, or 1.1%, to $6.83. Despite a rebound in the past two months, the stock is still off by 50% in the last year.

When Mulcahy took over as CEO in July 2001, the stock was trading between $7.45 and $9.68. Since then, the stock rose as high as $20.18 in July 2007, before sliding to low of $4.12 in March.

Mulcahy became CEO of a company struggling after a string of quarterly losses amid falling market share and a probe regarding Xerox's accounting practices. Its copier business was dying, debt was piled high, and she was soon forced to concede that Xerox had an "unsustainable business model."

Mulcahy, who joined the company in 1976 as a sales representative, rescued Xerox from near-bankruptcy by rebuilding relations with customers; cutting costs through the outsourcing of manufacturing and back-office operations; introducing new products, such as multifunction devices; selling preferred stock and most of the company's Asian operations; and resolving the government probe by paying a then-record $10 million fine.

She also is credited with expanding Xerox's business beyond traditional copiers and printers into the computer systems used by customers to manage documents, as well as into consulting services.

One of her skills is motivating the troops. "She stands out as being an extraordinary communicator in dark times," Robert Bruner, dean of the University of Virginia's Darden School of Business, said in a Wall Street Journal article last year.

Burns, meanwhile, is seen as a significant contributor to Mulcahy's achievements. For example, Burns is credited with successfully negotiating with company unions to eliminate or outsource thousands of jobs in 2001, a key part of Xerox's rebound.

Burns, who grew up in a New York City public housing project and got a master's degree in engineering from Columbia University, is a Xerox lifer who started her Xerox career as mechanical engineering summer intern in 1980. She vaulted into executive ranks after a stint as a special assistant to Xerox's former chief executive, Paul Allaire.

She is known for her blunt directness in speech and actions, and has spoken with a deep appreciation of the company's culture that preaches "diversity, quality...and pride in the brand."

Both Burns and Mulcahy have received much recognition for their place in business, appearing high in any list that ranks the most powerful women. However, Mulcahy - a regular top-ten member of The Wall Street Journal's annual "Women to Watch" list - said in 2006 that she looks forward to moving beyond gender.

"I yearn for the day when...the word 'woman' is not an unofficial part of my title...for the day when there is no need nor interest in a list of most powerful women in business," Mulcahy said at the time.

-By Jerry A. DiColo, Dow Jones Newswires; 201-938-5670; jerry.dicolo@dowjones.com

(Kerry E. Grace contributed to this report.)