SAN FRANCISCO (Reuters) -- Is there a wolf in penguin's clothing?

That is the theme of a spirited discussion among supporters of the Linux operating system, a freely available piece of basic software with a penguin mascot.

The wolf potentially lurking just outside the door, some Linux-boosters say, is Sun Microsystems, the high-end computer maker, which is expected to unveil its first general-purpose, low-end Linux machine, and its own version of Linux, on the eve of a major convention for the cooperatively developed software.

Linux, which will be debated and celebrated at the Linuxworld exposition in San Francisco Aug. 13-15, must prove itself in the rarefied world of running crucial corporate applications, like huge databases, analysts said.

Linux is a new version of Unix, the mainstay corporate operating system, though it does not yet have the reliability and power of older Unix systems, analysts say.

"Linux and Unix combined are competing with Microsoft," whose Windows program is graduating from personal computers to powerful servers and which offers its own, mostly-Microsoft view of the world, dubbed .Net," said Pierre Fricke, an analyst at research firm D.H. Browne.

Sun also remains one of Microsoft's biggest rivals, and its latest move has been blasted in advance by competitors.

"They are trying to control something which inherently isn't designed for that sort of control point," said Robert Gadsdon, Competitive Strategies Manager at Hewlett-Packard, which sells the most Linux machines.

Linux needs a boost

For its part, Dell says corporate customers are kicking the tires with Linux pilot projects. "I think they are all waiting to make sure this first project goes well," said Randy Groves, general manager of the enterprise systems group.

The world bought a grand total of $80 million of Linux software last year, down 5 percent down from 2000, and spending may grow to $280 million in 2006, technology researcher International Data Corp. forecasts.

That is less than 1 percent of spending on operating systems, but low in large part because the core Linux software, called the kernel, is free, said IDC's Al Gillen. About one-fifth of server computers shipped last year used Linux, unchanged from 2000.

Microsoft Windows server shipments rose last year by 17 percent, boosted by a change in licensing policy, he said.

"The fact that Sun is going to bring out a Linux distribution of its own would probably increase (Linux) credibility," Gillen said.

But Sun has a very different view of the developing market than others, even if CEO Scott McNealy did dress in a penguin suit earlier this year to show his commitment to Linux.

"Free source is like a free puppy," Sun software chief Jonathan Schwartz said in a recent interview, meaning that both end up requiring a lot of attention.

In fact, customers are not looking for free software, he said. "When I talk to customers about what they want in Linux, what they want is low-cost hardware."

Sun is expected to offer a low-end Linux server with two processors--the low-cost hardware--and integrate that into its own software system of its Solaris Unix and the Java platform, a widely accepted software language that is the base of the resistance to Microsoft.

Programs written in Java can run on a variety of operating systems with little or no modification.

Fricke says such tight integration between Sun's software, Linux and Java could fill a void. "Whereas .Net is a high-value platform, there is nothing really competitive with that in a single, high-value integrated package on Linux," he said.

But while conceptually Sun could offer a counterpoint to Microsoft, practically it is fighting off the other big hardware makers for market share, he said.

Sun will feel pain

Those big guns in the computer-making world agree Linux is not battling Microsoft, but Sun. The similarity of Sun's Unix and Linux make it easy to steal Sun customers, they believe.

"It is essentially the ultimate level playing field," if all vendors use Linux, and customers can easily switch, said HP's Gadsdon. "One of the companies that is going to feel a lot of pain is Sun."

HP is breaking into new markets, like Hollywood studios and special effects shops, by adapting Linux, and making money from services, storage and everything else wrapped around Linux.

John Sarsgard, vice president of Linux solutions at the most visible Linux supporter, IBM, said Sun's two-processor machine ignores the potential of Linux.

"We think it is good enough to do more than that. They are joining the party late and not jumping all the way in the pool," he said.