Luckily, after having done two really annoying reinstallations of the VMware server, we started seeing the pattern: This error would only occur upon reboot of the Vmware host system. Bad enough, since you install everything and it all works fine. Then, with Automatic Updates or some other legitimate reason, the host reboots and all the images stop working since the Vmware services start but don't function anymore. Hard to debug and even harder to catch through monitoring since all services appear to start fine.

 The only indicator of a larger problem is an entry in the application event log indicating the error message that you see in the title of this article (plus the path that goes with the executable). So, what can you do? Keep on reinstalling after every reboot doesn't seem to be too good an option...

The solution is simple: Add the local user account "__vmware user__" into the local "Administrators" group. Reboot (or restart all VMware services) and voila, your images will come up nicely!