When you use a TCP/IP-based smart card for authentication, authentication fails. This issue occurs after you apply the hotfix that is described in Microsoft Knowledge Base article 2412171.
To resolve this issue, apply the following hotfix:
2596993 Description of the Outlook 2007 hotfix package (Outlook-x-none.msp): December 13, 2011
Registry key information
Important This section, method, or task contains steps that tell you how to modify the registry. However, serious problems might occur if you modify the registry incorrectly. Therefore, make sure that you follow these steps carefully. For added protection, back up the registry before you modify it. Then, you can restore the registry if a problem occurs. For more information about how to back up and restore the registry, click the following article number to view the article in the Microsoft Knowledge Base:
322756 How to back up and restore the registry in Windows
After you apply the hotfix package, to have us enable the hotfix for you, go to the "Fix it for me" section. If you prefer to enable the hotfix yourself, go to the "Let me fix it myself" section.
Fix it for me
To enable the hotfix automatically, click the Fix it button or link. Then click Run in the File Download dialog box, and follow the steps in the Fix it wizard.
Install hotfix that is described in Microsoft Knowledge Base (KB) article 2596993 before you run this Fix it solution.
This wizard may be in English only. However, the automatic fix also works for other language versions of Windows.
If you are not on the computer that has the problem, save the Fix it solution to a flash drive or a CD and then run it on the computer that has the problem.