yes I have copied the zip file to tmp directory and I am running it from there
[root@esx351 tmp]# ls -l
total 452388
-rw------- 1 root root 5 Jan 17 03:02 cimserver_start.conf
srwxrwxrwx 1 root root 0 Jan 17 03:02 cimxml.socket
drwxr-xr-x 2 root root 4096 Jan 17 03:01 hsperfdata_root
-rw-r--r-- 1 root root 462775717 Jan 8 03:24 upgrade-from-esx3.5-3.5.0_update05-207095.zip
[root@esx351 tmp]# esxupdate --bundle upgrade-from-esx3.5-3.5.0_update05-207095.zip update
option --bundle not recognized
Enter /usr/sbin/esxupdate by itself to see a summary of commands and options.
[root@esx351 tmp]#