This issue occurs when at least one of the source disks from the virtual machine you are trying to convert contains a large amount of small files and a file-based conversion is performed. A file-based conversion is performed when you try to shrink the disks as part of the conversion.
If the drive that has a large amount of small files is the boot drive, you cannot perform a conversion and cannot resize the drive. VMware is aware of this issue and is working to resolve this.
To workaround this issue:
- Convert the source machine without shrinking the disks.
- Power on the resulting virtual machine after the conversion completes.
- Identify the drives has a large amount of files.
- Add a .vmdk file with the required size of the disk you want and present it as another drive to the guest operating system.
- Copy the data from the drive you want to shrink to the newly presented drive.
- After all the data is copied and verified, remove the disk you wanted to resize.
- Assign the drive (that has the size you wanted) with the drive letter that it originally had on the physical system.