Need help to set up mail sending with php

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Hi folks, we have a small setup difficulty here. We have a new ordering database set up on a mysql and php system running on windows xp. I would like to configure it to send a user their forgotten passwords (and later orders) by email.

This is the message that we get when trying to send a mail. The problem is that I have no idea about mysql and php and my colleague has only a little more than me.

From my point of view, I need to create an email account on the exchange server for the database system and put the name of the exchange server in the SMTP=localhost line. Is it something this simple or am I completely off target?

Any ideas or help to set this is very much appreciated.