In this paper, a novel motor topology (lateral stator machine) is proposed for various drilling applications where the space in the tool head is limited. The stator of the motor grows in one lateral direction, allowing for a compact direct drive design. Finite-element analysis (FEA) is carried out and the machine design is optimized for the specifications of a high-speed micro-machining spindle which is given as an example. The design procedure for those specifications is described in detail, where the torque is maximized while considering the space limitations and the loss constraints at the critical operating points. The construction of a lateral stator machine merged into a test bench is also described. The test bench is used for measuring the standstill torque of the machine in a configuration without bearings, such that only the electromagnetic torque is measured without any friction effects from the bearings. Moreover, the test bench can be modified to measure the no-load losses and separate the mechanical and electromagnetic components of it. Although described on a lateral stator machine, the measurement methodology of this paper can be applied to any electrical machine. Finally, measurement results are given and the design procedure is verified.