You can get this error for a variety of reasons (the associated error message gives a few possible reasons and things to check). In my case it appears that attempting to install SCVMM 2008 R2 on a server that has dashes (-) in the host name causes the installation to fail with this error. Renaming the host so that it no longer includes dashes in the hostname (SVR08-SCVMM-1 to SVR08SCVMM1) allows the installation to complete.

Other things I tested (to no avail):

  • Disable all NICs on the machine except the one used to connect to the DC
  • Rebuild the machine completely (three times)
  • Use a different domain (in fact, I built an entirely new Windows Server 2008 DC)
  • Disabled IPv6
  • Used a known good SQL Server, rather than installing a local copy of SQL Server (in case it was something to do with the SQL Server SPNs)
  • Used different domain accounts as well as LocalSystem

Symptoms of the problem are the following error message:

Virtual Machine Manager cannot process the request because an error occurred while authenticating SVR08-SCVMM-1.domainB.local. Possible causes are:
1) The specified user name or password are not valid.
2) The Service Principal Name (SPN) for the remote computer name and port does not exist.
3) The client and remote computers are in different domains and there is not a two-way full trust between the two domains. Log in by using an account on the same domain as the VMM server, or by using an account on a domain that has a two-way full trust with the domain of the VMM server, and then try the operation again. If this does not work, purge the Kerberos tickets on the VMM server by using kerbtray.exe, available at
http://go.microsoft.com/fwlink/?LinkId=93709. Then, reset the SPN for SVR08-SCVMM-1.domainB.local by using setspn.exe available from http://go.microsoft.com/fwlink/?LinkId=93710. If this still does not fix the problem, make SVR08-SCVMM-1.domainB.local a member of a workgroup instead of a domain, restart the computer, rejoin the domain, and then try the operation again.
ID: 2917. Details: The network path was not found (0x80070035)

In the detailed installation log the error occurs right after a Copy a File step.