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By Andrew Leonard

July 1, 1999 | The high-pitched whir of cordless electric screwdrivers fills the air in the main manufacturing room at Penguin Computing in downtown San Francisco. Cardboard boxes of motherboards and Pentium III processors are stacked next to tables where men and women wield the screwdrivers with calm efficiency, assembling CD-ROM drives, power supplies and cooling fans.

Penguin makes computers pre-installed with the Linux-based operating system, but the manufacturing side of the business isn't as high-tech as it sounds -- it's more like building with Lego blocks and Erector Sets: Plug this video card into a slot here; screw that drive in there. It's a quiet kind of industrial clamor: Only the screwdrivers zip and burble, like supercharged hummingbirds. Scrawled on a whiteboard on one side of the room is the phrase "Goal 1,100,000." It's a revenue target. In May, says 25-year-old Penguin founder Sam Ockman, the company cleared $1 million in revenue -- not bad for a 1-year-old startup. Four more whiteboards line the opposite wall, listing incoming orders from a motley assortment of universities, technology companies and Internet startups as fresh-faced as Penguin itself. There's even an order from the "City of S. Sioux City" in northern Nebraska. The dates of the orders are recent, freshly written -- hard evidence of spreading Linux fever.

The hardcore geeks and marketing flacks can argue all they want about which operating system is truly the best -- Linux, FreeBSD, Windows NT, Be, Mac. They can strut their benchmark biceps and natter on about the relative merits of networking code and multiprocessor support ad infinitum. But there's no arguing around the simple reality that to be a Linux start-up in the summer of 1999 is to occupy a very juicy niche in the techno-economy. The venture capitalists are hovering, eager to lavish capital on the newest buzzword -- open source -- to sweep across Silicon Valley. Got an open-source business plan? Get ready to go public -- the time is now. Red Hat Linux, the leading Linux distribution vendor in the United States, is already on the runway, and many more are lining up behind it.

For Sam Ockman and Penguin's executive vice president, 23-year-old Alison Huynh, the possibilities are tremendous: Unlike many Linux-related companies, Penguin enjoys actual revenue and is moving real product. The venture capitalists are suddenly calling them, which is, as Ockman notes, "a good sign." But pitfalls also loom. Like many open-source entrepreneurs, Ockman and Huynh talk a lot about "giving back to the community." Their conversation is laced with idealistic references to the democratic, anti-monopolistic qualities of the open-source software development model. At the same time, they make no attempt to hide their ambition to build the next great computing company -- the Dell or Compaq of the early 21st century.

Can these goals be reconciled? When push comes to shove, will the venture capitalists hungering for a piece of Penguin's action support open-source idealism or crush it beneath their wingtips? Silicon Valley is littered with companies whose founders have been forced out or pushed aside by investors who could not care less about whatever idealism may once have driven the business plan. Will Penguin join that list?

Such questions are unanswerable for now; all one can do is watch and see what happens. But Penguin may be especially worth tracking. It's not your typical startup: Penguin's director of communications, Andrew Kaufman, has a Ph.D. in Russian literature from Stanford. Its first "angel" investor, Al Smith, likes to quote the German philosopher Ernst Cassirer and talk sincerely about how important it is to fund the possibility of "ideas" that threaten the status quo. And even though a penguin (the Linux mascot) may not seem like the most intimidating of corporate symbols, Alison Huynh says that "underneath the fuzziness there is a fierceness." Watch out -- this penguin might bite.

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