SQL Server was not configured to allow mixed authentication.
Here are steps to fix:
- Right-click on SQL Server instance at root of Object Explorer, click on Properties
- Select Security from the left pane.
- Select the SQL Server and Windows Authentication mode radio button, and click OK.
Right-click on the SQL Server instance, select Restart (alternatively, open up Services and restart the SQL Server service).
I wish Microsoft has better document.
Source: http://stackoverflow.com/questions/1719399/sql-server-2008-cant-login-with-newly-created-user
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