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Wednesday, many giving medication sources confirmed that Justice Department lawyers have proposed separate Microsoft Corp. as a remedy for the companys allegedly anti-competitive behavior. The proposal was discussed over the weekend at a secret meeting of officials from the U.S. government and 19 states that have sued Microsoft. The rate of the Federal government and the states was presented to Federal Mediator Richard Posner last Monday, which was the filing deadline. Posner has been meeting in Chicago with state and federal prosecutors every Monday and with the company each Tuesday. Microsoft spokesman prepare Murray said "I cant speculate on what the government is thinking."He called the proposal "an extreme and radical proposal that is not justified by anything in the slip of paper and doesnt reflect the reality of the competitive industry." The company also said, "it is ironic that anyone would be talking about breaking up Microsoft at the time that Ame rica Online and condemnation Warner completed the largest merger in history designed to compete with Microsoft." The governments endorsement of a break-up, considered the "death penalty" among possible remedies, could encourage Microsoft to seek a lesser sanction during settlement talks. But it could also delay negotiations and encourage Microsoft to battle the case through Americas courts for years.What isnt known is exactly how the government plans on restructuring Microsoft. very much speculation has focused on the idea of dividing the software giant into three separate companies. One would build the Windows operating system, another that sells software applications and a tertiary for Internet business. However, at least one source told the Associated Press that such a three sector Microsoft is not planned. Rather, Page 2according to the source, the government wants to force the creation of a series of smaller, duplicate companies, nicknamed "Baby Bills," t hat would compete against each other.Breaking up Microsoft into smaller companies would be "stupid because it just creates disorderliness in the marketplace," said Michael Cusumano, a professor at the Massachusetts Institute of Technology who has written about Microsofts battle with the former Netscape Communications Corp. "The break-up sounds like a mess to me," he said. The market responded because Microsoft shares closed down 3-9/16 at 105-13/16 on Wednesday.In November, U.S. District Court Judge Thomas Penfield capital of Mississippi agreed with federal prosecutors in a preliminary finding that Microsoft stifled innovation in the computer industry. Prosecutors have charged the company used its ascendant position in operating systems to coerce PC makers to use its software, especially its Internet browser.