* CEO contract extended by a year

* COO to become deputy CEO, lining him up to succeed

* Q1 revenues rise, following 6 years of sales declines

* Shares up 2.1 percent (Recasts on CEO succession, adds detail, analysts, shares)

By Eric Auchard and Matthieu Protard

FRANKFURT/PARIS, April 27 (Reuters) - STMicroelectronics has extended the contract of its CEO by a year and lined up its operations chief to succeed him, seeking to end a battle over succession between France and Italy, a source with knowledge of the matter said on Thursday.

The move came as Europe's second-biggest chipmaker, in which France and Italy jointly control a 27.5 percent stake, reported a pick up in profits and sales in a fiercely competitive global market marked by big takeovers and demand for sensors for the burgeoning "Internet of Things".

Long-time CEO Carlo Bozotti will have its mandate extended by a year, while operations chief Jean-Marc Chery will become deputy CEO on July 1, STMicro said in separate statements.

"This new organisation and the creation of a new deputy CEO position positions Chery as Bozotti's successor," the source said, speaking on condition of anonymity.

STMicro hired head-hunter Spencer Stuart about a year and a half ago to find a replacement for Bozotti, whose current term was due to end at the company's annual shareholders' meeting on June 20. The 64-year-old Italian has been CEO for 12 years.

However, Paris and Rome, which have regularly clashed over nominations of top managers and operational strategy, were at loggerheads over the succession, the source said, without elaborating on the nature of the dispute. The Italian treasury declined to comment, while the French economy ministry did not immediately respond to requests for comment.

In January 2016, Paris publicly complained about STMicro's strategy and hinted it was deeply dissatisfied with Bozotti when the company announced plans to cut about 430 jobs in France.

Chery, a 56-year-old French national, joined Thomson Semiconducteurs in 1986, the company that subsequently became STMicro. He held various positions in product planning and manufacturing and in 2008 became chief technology officer.

Separately, STMicro posted a 12.9 percent year-on-year rise in first-quarter net revenue to $1.821 billion on demand for its phone and industrial sensors. That marked a turnaround from six years of sales declines, but was in line with analyst forecasts.

The company forecast 5 percent growth in revenue in the second quarter from the first, or up 12.3 percent year-to-year, and said it was on track to meet 2017 objectives.

STMicro shares, up 36 percent so far this year and trading near nine-year highs, were up 2.1 percent at 1050 GMT.

The anticipated 5 percent sequential revenue growth would mean STMicro is performing at least as well as several peers, including Texas Instruments, Infineon and Maxim. NXP, which has agreed to be acquired by Qualcomm, is poised for a small drop in revenue growth.

But in a note to investors, UBS said the low single digit operating earnings growth anticipated for STMicro in 2017 "won't be enough to justify the recent strong run in the share".

(1 euro = $1.0906) (Reporting By Eric Auchard in Frankfurt, Matthieu Protard in Paris; Additional reporting by Mathieu Rosemain and Gwenalle Barzic; Editing by Biju Dwarakanath and Mark Potter)