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Before downloading ArcSDE 9.0 Service Pack 3, it was possible to use "" as a username and password from ArcCatalog in ArcSDE 9.0 and SQL Server if the SQL Server instance had BUILTIN\ADMINISTRATORS as a Windows Group.
After downloading ArcSDE 9.0 Service Pack 3, logging in with "" as a username and password returns the error message:
"Failed to connect to the specified server. Bad user login"
Use a valid username and password to log in, and avoid using "" to log in.