If you get the above error while connecting to Team Explorer from either Visual Studio 2008, the reason “might be” Microsoft Communicator or Live Messenger installed on the machine and on top of it if you also have Team Foundation Server Power Tools installed. I have seen this error so far only with VS 2008 with TFS 2010.
Somehow the Power Tools –> Team Members feature is trying to collaborate with the Microsoft Communicator members and throws below error as it might be failing to connect.
Quick Fix:
Go to Visual Studio 2008 –> Tools –> Options –> Team Foundation Server Power Tools and set Team Members flag as False. Restart Visual Studio and you should not get that error.
Thanks,
Vishal Modi