May 24, 2013 · 3 minutes

Hardly a financial quarter passes for Hewlett-Packard when there isn't an abundant use of the term “headwinds.” It's a great term for a company in turnaround to use because it refers to innumerable, vague factors that are out of your hands. Who can stop the wind from blowing? Not even a CEO who drew $15.4 million in compensation last year can manage that.

Hewlett-Packard's headwinds have been blowing so fiercely for so long that the company is starting to resemble one of those coastal trees so wind-blown they start to grow at a strange angle. The PC business HP acquired in the $25 billion Compaq deal saddled it with a dying business. Printers, long HP's cash cow, are less wanted in the age of Instagram. The software and services businesses has been hurt by a slowdown in corporate IT spending and the controversial $11 billion purchase of Autonomy.

Little of this mess is the direct fault of HP's current CEO, Meg Whitman. Since being named CEO in September 2011, she has struggled with the after-effects of ill-advised acquisitions, aggressive job cuts, a revolving door of controversial CEOs, and one of the most dysfunctional boards in the history of Silicon Valley (which Whitman became a member of in January 2011).

So when HP gets even a modest amount of good financial news, it's enough to send the stock up 17 percent in one day. HP's earnings of 87 cents a share in its most recent quarter beat analyst expectations of 81 cents, even as revenue fell 10 percent to $27.6 billion, below analyst expectations of $28 billion. Much like those wind-bent trees, HP's growth is sideways at best. Still, value investors will take improvement where they can get it.

Whitman has been taking an aggressive approach to restructuring the company – cutting 29,000 more jobs through the end of fiscal 2014 – and her efforts are starting to bear fruit on the bottom line. Notably, pushing high-end printers to companies while selling lower-cost yet still profitable ink jets in emerging markets is slowing the decline in a key category.

The PC division, meanwhile, saw revenue fall 20 percent to $7.58 billion. On the conference call, Whitman did her best to position the troubled unit for a turnaround, citing the $169 Slate tablet, powered by Android. Whitman referenced Android three times in the call, while Microsoft's Windows wasn't mentioned once.

But most of all, there was talk of headwinds. Whitman used the word eight times in the call and CFO Cathie Lesjak chimed in with three more mentions. There were macroeconomic headwinds in Europe and China, compounded by currency headwinds. The shift to software as a service was another headwind. Servers faced secular headwinds. And all of these may blow for some time. “I think we had a good shot at growth in 2014,” Whitman concluded. “But there's no question there's headwind.”

Cutting costs and navigating sluggish or declining markets doesn't make for a turnaround. It buys time and positions a company for growth once those markets improve. But it's not clear whether many of HP's markets will be growing soon: PCs are in decline and tablets are already competitive; x86 servers are becoming low-margin commodities; and printers are becoming less necessary by the year.

So it may be risky to read too much optimism into the 17-percent rally in HP's shares, much of which was likely driven by short sellers buying back shares. HP's cash flows from operations increased 44 percent to $3.6 billion and free cash flow nearly doubled. Those figures show that Whitman's restructuring is having a nice short-term effect on the company's finances. But unless it's followed by future growth, that trend won't last very long.

As Bill Shope, an analyst at Goldman Sachs put it,

HP’s businesses are facing even more distress than we originally anticipated, and we believe the company’s short-term, restructuring-driven profit and cash flow recovery is unsustainable. The company remains heavily exposed to some of the most distressed end markets in the technology industry, and we believe its current challenges are largely related to years of underinvestment from overly aggressive cost cutting. We don’t believe this can be sustainably solved with more restructuring.
That's the thing about headwinds. They're not anyone's fault, but neither can they be stopped. They just blow and blow. And too many of HP's businesses are too deeply rooted in areas exposed to them for the company do to anything but continue to move, at best, sideways.