Dash Navigation is getting out of the hardware business and cutting 55 jobs, or 65% of its workers. The startup, which is backed by both Sequoia and Kleiner Perkins, makes the Dash Express car GPS device. This is a network-connected GPS that pools the location and speeds of all nearby Dash owners to give them back real-time traffic reports. It also supports geoRSS feeds, and other GPS apps.

Despite its novel features (I am a big fan of the device) and the $71 million the company has raised, going into the hardware is business looks like it was a wrong turn. Dash will now pursue a strategy of partnering with other device manufacturers, including cell phone-makers, to add its software to their devices.

Dash never made a push into retail stores. The device is only sold through Amazon and other online retailers. (At Amazon, it is currently ranked No. 16 in the “Vehicle GPS” category and No. 940 in “Electronics”). Existing customers will continue to be supported and receive software upgrades as they become available.

Dash already has a strong API program for developers, and licensing is a good idea. I’d love to see a Dash app on the iPhone, Android, and Blackberry phones.

But it seems risky to shift gears at this point from a consumer-facing startup to a software licensing company dependent solely upon other manufacturers. The strongest GPS navigation manufacturers, such as Garmin and TomTom, are unlikely to license Dash’s software for their own devices. Part of the appeal of owning a Dash is being connected to other Dash owners and sharing driving data with each other. By making its own device, Dash created a focal point for that community and could completely control the user experience. All of that will now go away.