On the VM (Linux)

1. Test Everything
2. Review configurations
3. Clean up – get rid of everything that you don’t need (for RPM based Linux):  du -sh /home/*;  ls -lh /tmp; yum clean all; find . -type f -size +100M -exec ls -lh {} \;
4. Zero the drive space — on linux: cat /dev/zero > zero.fill;sync;sleep 1;sync;rm -f zero.fill

In VMware Fusion (Mac)

1. Open the Settings UI for the Virtual machine, select the hard drive & click Clean Up Disk
2. Select the VM in Virtual Machine Library; under select Virtual Machine -> Downgrade Virtual Machine
3. Copy the vmx & vmdk files
   

On the Machine with VMware Converter

1. # vmware-converter-client
2. Click Convert Machine
3. Set Source-Type: VMware Workstation or Other VMware virtual machine
4. Select the vmx file 
5. Click next
6. Set Destination Type: Virtual appliance
7. Enter the VM Name
8. Enter the Directory to save the new virtual appliance
9. Set the Distribution Format: Single File (*.ova)
10. Click next
11. Edit the Product Information and other text
12. Click next
13. Review
14. Click Finish
15. Copy ova file

On other VMware machines

1. Test ova file

RELEASE
PARTY

Ref:
http://www.howtoforge.com/how-to-shrink-vmware-virtual-disk-files-vmdk