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, 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, 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. 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, of 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 relatively 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 shares recently fell 3% to $6.69. Despite a rebound in the past two months, the stock is still off by 50% in the last year.

Barclays analyst Ben Reitzes noted that while Xerox reiterated Thursday its second-quarter per-share earnings outlook of 10 cents to 12 cents, the stock is unlikely to see consistent gains until revenue and earnings stabilize, which may not happen until the fourth quarter this year.

As for Mulcahy's departure, the timing raised some eyebrows since Xerox is suffering during the recession.

However, Robert Bruner, dean of the University of Virginia's Darden School of Business, said that the exit marks an end to a period focused on turning around the company. Now Xerox's chief will be faced with determining how one of the world's largest printing companies deals with a worldwide shift to electronic communication.

"Xerox, as a technology company, really has big issues in front of it," he said. "What is the future of copying in a digital world?"

The last time Xerox faced such changes was when Mulcahy assumed the CEO post in July 2001. At the time, the company was struggling after a string of quarterly losses amid falling market share and a probe regarding Xerox's accounting practices.

Mulcahy, who joined the company in 1976 as a sales representative, rescued Xerox by, among other things, cutting costs through the outsourcing of manufacturing and back-office operations; introducing new products, such as multifunction devices; 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.

When Mulcahy took over as CEO, 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.

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.

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

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

(Kerry E. Grace contributed to this report.)