The way that email subscriptions are processed is that the reports are sent to the pickup directory and then it is the SMTP server the one that finishes the process of sending it to the final user.
When your email (subscription) doesn´t arrive to its destination, want to distinguish if the problem is in Reporting Services or in the SMTP server.
A quick way to find out is doing the following test: setup the SMTP using IIS. From your configuration file you could set the following settings:
This will create an eml file in the C:\eml directory (create it first or put a location already existing).
Ensure that the RS NTService has access to this directory
Run the subscription. An eml file should appear.
If this works, Reporting Services is working and the problem is the SMTP server. The troubleshooting should be focused now on the SMTP server configuration
To set up email delivery for RS you probably you may want to follow the steps in the article in http://technet.microsoft.com/en-us/library/ms345234.aspx under the section “To configure a local SMTP Service for the report server”
Reporting Services Support Engineer