Power off the virtual machine that holds the boot volume that you want to extend.

From the service console, increase the size of the .dsk or .vmdk virtual disk file.

Extend the virtual disk with vmkfstools. The input to the -X switch is the size that you want the disk file to be not the size you want to extend the disk file by
#vmkfstools -X 12G testing.vmdk

For this step you will need an additional Virtual Machine running Windows Server 2003. Power off the second Virtual Machine, and add the disk from the first Virtual Machine to it through the mui. Power up the second Virtual Machine and verify that the imported disk has unallocated space on it.

For the following diskpart operation it might be necessary to boot in "save mode" (Press F8 when you start).  I experienced problems running diskpart.exe when I didn't run it in safe mode. Don't open the Disk-Management GUI prior running the diskpart, it might lock some operations.

From the run menu type "diskpart.exe" to enter the command line utility to resize disk partitions in Windows Server 2003.
The command list volume will show you all the available volumes.
Select your volume. select volume X corresponds to the volume that you want to extend.
Finally extend the volume with the extend command.

Shut down the second Virtual Machine and remove the disk from the second Virtual Machine. Power on the first Virtual Machine and check out your new space.

Resize first the Partition in the guest system (you can use Partition Magic or a similar  product). If the boot volume needs to be resized, attach the Virtual Disk to another Virtual Machine to resize the guest partition.

The guest partition must be smaller as the planed size of the Virtual Disk or the data will be corrupted.

Shrink the Virtual Disk with the command:
vmkfstools -X  4G testing.vmdk --force            

The shrink in the vmware tools doesn't work on ESX server. It is only usefull if you plan to export a disk to GSX server, if you use shrink before the export, only the used portion will be exportet.

Another option is ghosting to a new smaller disk