I was talking with someone and they suggested enabling the public folders on exchange 2007 for this to work.
I tried to following the resolution
Earlier Outlook clients cant connect to Exchange 2007 Server, but now when I try to enable public folder distribution, under the Default Offline Address book properties. I get the error:
The following error(s) occurred while saving changes:
set-offlineaddressbook
Failed
Error:
Your organization does not have any Public Folders infrastructure. You cannot configure Offline Address Books for Public Folder Distribution.