Xerox Corp said on Thursday Anne Mulcahy, who has been credited with revitalizing the world's top supplier of digital printers and document management services, will retire as chief executive in July and be replaced by Ursula Burns.

Burns, 50, will join a list about 15 women CEOs of a Fortune 500 company and become one of only a handful of African American CEOs. She joined Xerox in 1980 as an engineering intern, was named president in 2007, and had been groomed as the next CEO by Mulcahy.

She has been at my side helping to turn Xerox around, Mulcahy told investors on Thursday at the company's annual shareholder meeting, which was broadcast over the Internet.

No significant strategic changes are expected as a result of the transition, which analyst Shannon Cross of Cross Research characterized as well-telegraphed.

As the two executives have been working as a leadership team since April 2007, we expect this transition to be seamless, she said. Burns has already been running corporate strategy, global accounts, IT and human resources.

Mulcahy, 56, an economic adviser to Barack Obama during the U.S. presidential transition, will retire as CEO on July 1. She is a 33-year veteran of Xerox, where she became CEO in 2001.

She will stay on as the company's chairman.

Under Mulcahy's leadership, the Norwalk, Connecticut, company has rebounded from fiscal troubles, returned to profitability, and improved market share. Earlier this month, it introduced a new solid ink system that promises to shrink the cost of color prints to near that of black-and-white.

Still, Xerox has shown signs of weakness due to the economic slowdown, as its customers delay purchasing printers and supplies. In April it cut its 2009 profit outlook nearly in half.

Shares of Xerox fell about 1.6 percent to $6.79 on the New York Stock Exchange. Over the past year the stock has underperformed the S&P 500 index, but it has significantly outpaced the index in the past three months.

LITTLE JOY AT MEETING

At the start of her tenure, the company was struggling with slack sales, debt woes and questions about how it handled its books. For a time there was speculation that Xerox, whose roots date back to the early 1900s, was heading for bankruptcy.

Since then Xerox, whose rivals include Canon Inc <7751.T> and Hewlett-Packard , has returned to profitability. It trimmed billions in costs by shedding thousands of jobs, moving major manufacturing overseas and cutting unprofitable assets.

Still, at the shareholder meeting, there was little fanfare for Mulcahy or the executive switch, as she and the company's board took flak over cost-cutting moves that affect health care benefits for its retirees.

Over the past few years ... Xerox has spent $4 billion on buying back stock. It was too bad that they didn't have retirees in mind when they made that decision, said one person who identified himself as a retired Xerox employee.

You are hitting a retiree population that has very little choice in term of gaining more income, said the speaker, one of many who addressed the board on that topic.

Mulcahy said all of its cost-cutting moves, including a recent reduction in staff of 3,000 workers, or about 5 percent of its work force, were necessary for the health of the company. Xerox ended 2008 with about 57,000 employees, down from about 92,000 in 2000.

I would suggest to you that both our current employees as well as our retirees have been impacted by the economic challenges that we face, Mulcahy said. We have also had a lot of hardship within the company ... to make sure there is a Xerox in the future, she said.

(Reporting by Franklin Paul; Editing by Gerald E. McCormick and Brian Moss)

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