Factory Reset not working - stuck on Blue Flame

My Sony Xperia S SGPT121 is stuck on the blue flame. When I power it on it shows the Sony Screen, then the Xperia Screen, than the blue flame running from left to right... and this continues for hours. I can force a shut-down by pressing the power button for 10 seconds.

I tried the factory reset (Volume-up + Power-on, release Power-on at Sony Screen) but it is not going to the setup screen. It has no effect at all - simply going from Sony Screen to Xperia Screen to blue flame....