Causes: Your SMTP server requires authentication.

Resolution

1. From the Tools menu, choose Accounts.
2. Highlight the account and select properties.
3. Select the Servers tab.
4. Check the box next to My Server Requires Authentication.
5. Usually you use the same account for POP3 for authentication. If not then you need to enter the account details by clicking more settings
6. Click OK.

Source: oeupdates.com