German electronics and engineering giant Siemens reported a 3 percent drop in earnings and declining sales for its fiscal first quarter on Thursday, but remained cautiously optimistic for 2003. Siemens reported net income of €521 million ($560 million) in the three months to Dec. 31, down from €538 million in the same period a year earlier. "Our first quarter results are better than expected," Siemens CEO Heinrich von Pierer said in a statement. "However we stand by the overall outlook which we provided in December." Von Pierer warned at the end of last year that 2003 would be a tough year that would see rising pensions costs and low earnings from stock holdings drag down profits.