New York--Could laptops be relegated to the sidelines? One company is hoping the days of lugging a laptop from meeting to meeting are numbered.

Limitations with smartphones, such as small screens and tiny keyboards, have prevented them from becoming a computer replacement, but the Redfly companion device, made by Salt Lake City-based company Celio, is aiming to change all that.

The Redfly, which came to market last month, is a smartphone terminal with an eight-inch screen and full keyboard that enables you to use your smartphone like a laptop. Redfly links to the smartphone via a USB cable or with Bluetooth giving you access to you smartphone applications on a larger screen and full keyboard.

Since there is no operating system, central processing unit or storage, there’s no risk of data falling into the wrong hands if the device is lost or stolen.  The device, which sells for $499, has eight hours of battery life and works with Windows Mobile operating system, which is found in smartphones from Palm (PALM), Motorola (MOT), Samsung and HTC.  It weighs two pounds and also acts a charger for the smartphone.

“If you go out and buy a laptop, it doesn’t synch perfectly with a smartphone,” said Brad Warnock, vice president of marketing at Celio. “If you lose the Redfly device, you don’t lose any personal data because nothing resides on the Redfly. It doesn’t create any additional risk.”

The loss of laptops has been an ongoing problem for corporations, with countless cases of data breaches as a result of lost mobile devices. According to a survey conducted last year by Scott & Scott and Ponemon Institute, 85% of corporate survey respondents reported having a data-breach event, with almost half of the breach incidents due to lost or stolen equipment like laptops, PDAs and memory sticks.

Celio isn’t the first company to come out with a companion for a smartphone, but the company is betting it will have more success than Palm did with the Foleo, which was announced last May and canceled four months later. Analysts said Palm’s Foleo wasn’t successful in part because it had its own operating system, which put an extra burden on the IT department at corporations. Other devices like handtop computers, which are full-featured portable computers that are a little bigger than PDAs but smaller than laptops, can cost more than a thousand dollars and also add complexity to the IT department, said analysts.

The Foleo had its “own processor, its own storage…it’s another threat for the IT department,” said Philippe Winthrop, research director at market research firm Strategy Analytics.  With the Foleo there was further support needed.

According to Winthrop, Celio’s Redfly could have more success because it doesn’t require extra support from the IT department. What’s more, he said it should appeal to people who don’t want to carry a laptop on short business trips when all they need is access to email, documents and Powerpoint presentations.

“It literally extends the mobile device,” said Winthrop. “It’s taking everything going on with a mobile device and providing a useable screen and useable keyboard.”   

Currently the Redfly doesn’t work with Research in Motion’s (RIMM) Blackberry, the predominant smartphone for business users. But Warnock of Celio said the company is “working through the feasibility” of making it work. He said he couldn’t provide a time frame as to when an announcement could come. Since most users of smartphones are in the corporate market Celio is focusing its efforts on corporations at the current time. Still Wornack said Celio will eventually have a consumer launch.

“We want to go after the iPhone market,” said Wornack, noting the company has nothing in the works right now. “The iPhone product has a great user interface but the standard limitation of a smaller screen.”