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I'm currently having problems updating my device to the latest software. The problem occurs when I'm told to turn the phone off and reconnect it after that it does nothing. It doesn't do anything. Also it recieved water damage but works fine when connected and has no major side effects.
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Does the volume down button work when the phone is on regarding that you have a water damage on the phone? Since you are suppose to press and hold the volume down button while connect to PC Companion when you have turned off the phone.
If the volume down key doesen't work I would suggest that you raise this with your local Xperia support team. Please follow the link for contact information:
The volume down button works.
In that case I would suggest that you try with Update Service instead of PC Companion:
http://www.sonymobile.com/global-en/tools/update-service/
Keep us updated if you still having issues.