In the age of Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG), it's hard to remember that Xerox Corp. (NYSE: XRX) was once one of our best tech innovators. Yes, Xerox. That copier company also invented the fax machine, the computer mouse, networked computers and the laser printer.

Today, Xerox is working hard to move away from projects that create new patents in wide-ranging fields. In a strategy change capped by a major acquisition last year, Xerox has become a service company. A sample of its services includes managing printing costs for corporations, translating documents, processing child support payments, collecting road tolls and handling direct marketing campaigns.

Services have bigger, more predictable profits than the inventions of Xerox's past, and competitors can't undercut these earnings simply by making cheaper knock-off products. The change is supposed to give the company a smoother, prettier earnings picture than this wonky chart that marks the uneven performance of its past.

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But after some excitement over the transformation, enthusiasm for Xerox shares fell off.

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In other words, Xerox may be a blue-chip buying opportunity for value investors now. YCharts Pro gives Xerox shares a neutral rating, estimating that they are trading at about fair value. But with a new business model and recent acquisitions, the company's earnings potential is more than past performance indicates. The question for investors: Is Xerox capable of turning its new business model into gains for shareholders?

Xerox's seminal acquisition in its makeover was the $6.4 billion purchase of Affiliated Computer Services early last year. Since then, there have been good signs that the company will make more money in its new consulting role than it did as a hardware-heavy business. Management contends that the focus switch will expand the size of its potential market from about $132 billion to $500 billion. The chief executive forecasts annual earnings gains of 10% to 15% in the near future and notes that with the acquisition, the percent of Xerox business from services compared to hardware is about 50%. It was about 23% in 2009.

While the Affiliated acquisition made Xerox a leader in this market, the company says it will continue to buy services businesses to ramp up earnings growth. Already this month it announced the purchase of a small printing and software consultancy in the U.K. Although earnings reports since the Affiliated merger are a mess of one-off charges, the results so far generally beat analyst forecasts. With less focus on hardware, research and development becomes a lesser expense for the company.

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The share price may rise throughout the year as Xerox stock buybacks kick in. The company has promised to buy back about 4.6% of its shares in 2011 and an additional 7.4% in 2012. But Xerox's past share performance might give potential investors pause. While it's true that prescient investors who bought at its lowest point in 2009 almost doubled their investment, there were some serious slides along the way. And its share price today is about where it was 10 years ago.

On the other hand, Xerox already has $21.6 billion in annual sales, and it has just become a market leader in a field with higher growth and profit margins. Surely that will lead to stronger earnings that will benefit shareholders. So there's the dilemma. With its share price depressed, Xerox has the chance to turn its new niche into great gains for shareholders. Or the remake may be more like the computer mouse: a great invention Xerox couldn't figure out how to sell.

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Dee Gill is an editor for the YCharts Pro Investor Service.

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