From the Microsoft Application Verifier, which detects common developer mistakes. One of those mistakes is the use of NTLM:
NTLM is an outdated authentication protocol with flaws that
potentially compromise the security of applications and the operating
system. The most important shortcoming is the lack of server
authentication, which could allow an attacker to trick users into
connecting to a spoofed server. As a corollary of missing server
authentication, applications using NTLM can also be vulnerable to a
type of attack known as a “reflection” attack. This latter allows an
attacker to hijack a user’s authentication conversation to a
legitimate server and use it to authenticate the attacker to the
user’s computer. NTLM’s vulnerabilities and ways of exploiting them
are the target of increasing research activity in the security
community.
Although Kerberos has been available for many years many applications
are still written to use NTLM only. This needlessly reduces the
security of applications. Kerberos cannot however replace NTLM in all
scenarios – principally those where a client needs to authenticate to
systems that are not joined to a domain (a home network perhaps being
the most common of these). The Negotiate security package allows a
backwards-compatible compromise that uses Kerberos whenever possible
and only reverts to NTLM when there is no other option. Switching code
to use Negotiate instead of NTLM will significantly increase the
security for our customers while introducing few or no application
compatibilities. Negotiate by itself is not a silver bullet – there
are cases where an attacker can force downgrade to NTLM but these are
significantly more difficult to exploit. However, one immediate
improvement is that applications written to use Negotiate correctly
are automatically immune to NTLM reflection attacks.
By way of a final word of caution against use of NTLM: in future
versions of Windows it will be possible to disable the use of NTLM at
the operating system. If applications have a hard dependency on NTLM
they will simply fail to authenticate when NTLM is disabled.