Issue was resolved by:
1. Control Panel > programs and features
2. Select MS Office version that has outlook installed on your PC
3. Select change
4. Select repair
5. Reboot PC
If that doesn't fix it, try using scanpst.exe located at:
<disk drive>\Program Files\Microsoft Office\OFFICE12
or
<disk drive>\Program Files\Microsoft Office\Office14
or
<disk drive>\Program Files\Microsoft Office(x86)\Office14
source:
- http://office.microsoft.com/en-us/outlook-help/repair-outlook-data-files-pst-and-ost-HA010075831.aspx
- http://support.microsoft.com/kb/27222