I'm sorry that you have been dealt this blow! I understand the feelings of job insecurity having been in an industry that always seemed to be shrinking. I was laid off once in the late 80's when the parent company I worked for went into chapter 11, even though our country unit was booming. The experience has left me with an enduring feeling that no job will ever be totally secure!
Hard as it may seem, try and be yourself and carry on doing you job as best as before.
Get your CV up to date though!
Is the market for people with your skills flat, or are there opportunities out there? Can you start your own consultancy? It all comes down to whether you have a network of people who can put work your way. Explore other avenues open to you. Consider all you have to offer, not just the skills of your current role.
Network with people and search, apply for jobs online. Don't expect the latter to yield a great deal however. Focus on your network! If you have a lot of technical skills/certification, make sure these are clearly listed in your CV.
The good news is that you have had some warning of impending doom and there is a possibility that you might retain your job anyway (but don't bank on this). There is nothing worse than the "clear your desk" experience! Whilst your employer is seeming to play fair by informing you now, the result of this will be to make everyone uptight. Keep your feelings to yourself and don't confide in anyone.
Good luck mate!