This is a quite a common issue and there are a few solutions and ive seen it on a number of IT forums with numerous solutions. Try the solutions below.
1.) First of all this is a known issue with exchange 2007 pre service pack 2. If you do not have the latest service pack and latest updates installed do this before going any further. Here is a link to service pack 3 for exchange 2007
2.) We next to make sure that windows authentication is enabled. So under server manager > Roles > IIS we need to make sure that windows authentication is selected aswell as basic authentication.
Additional to this, In IIS under the virtual directory, Autodiscover properties> Directory Security> Authentication Methods> make sure “Integrated Windows Authentication” is selected.
3) Finally under the below virtual directories. Select them all.
Once highlighted select Authentication, right click on Windows Authentication and select Advanced Settings and put a check in the enable kernel-mode authentication.
If anyone is aware of further possible fixes then please comment below.