We had a VMWare VM at work with two cores allocated to it that ran a pretty heinous process in IIS. Under load the process was maxing out the CPU usage on both cores, so we asked our system engineers to present the other two cores of the physical processor to the VM. The engineer immediately said that this would not improve performance at all, but would make the VM perform worse.

That statement didn't make much sense to me, and I'm wondering how what the engineer said could be true. Are there actually cases where four cores presented to a VM would cause worse performance than two cores on the same physical hardware? Let's assume an ideal situation where there's only one VM on the host server, so nothing is being shared with other OS instances.

I believe the physical server had a single quad core processor, and was most likely hosting multiple VMs. I don't really know what version of ESX was running on the host, nor do I know with certainty what the physical processor config was, but from within the VM I had access to, I saw two 3.33 GHz AMD processors.

In the end, I never got to test the engineer's assertion out because (while we were trying to get the VM upgraded) we were able to optimize the process and reduce it's CPU consumption, and 2) we ended up migrating to a different VM on another ESX server which had four cores presented to it.